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Backtest Strategy weak points


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Backtest Strategy weak points

  #11 (permalink)
walter739
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kevinkdog View Post
Are you placing all limit orders, or are at least some orders market and/or stop orders?

You can't buy at the bid and sell at the ask, which is what $0 slippage implies...

All orders at market in the strategy.

In the past i use sppedytradingservers, the velocity i thought this help me to reduce the slippage to 0 in bar of 15 min.

If my orders all at market i must slippage min (1) to have a more real backtest although I use sppedytradingservers ?

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  #12 (permalink)
 kevinkdog   is a Vendor
 
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walter739 View Post
All orders at market in the strategy.

In the past i use sppedytradingservers, the velocity i thought this help me to reduce the slippage to 0 in bar of 15 min.

If my orders all at market i must slippage min (1) to have a more real backtest although I use sppedytradingservers ?

Speedytradingservers is great, but it will not save you from slippage.

When your order goes to the market, for a buy you pay the higher ask price. BUT, your strategy might think you have been filled at the bid price. That is what I am calling slippage - the difference between the real money fill price and the strategy fill price.

Sometimes you'll get real money filled at ask, and the strategy will think you paid the ask, so that would be $0 slippage.
Sometimes you'll get real money filled at ask, and the strategy will think you paid the bid, so that would be $12.5 slippage.
Sometimes slippage can be even greater than that (in a fast market).

And, since you are using market orders on both entry and exit, you could easily be hit on both sides.

So, the net impact of slippage on your particular strategy ($30 average profit per trade before slippage) is HUGE.

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  #13 (permalink)
walter739
Caracas
 
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kevinkdog View Post
Speedytradingservers is great, but it will not save you from slippage.

When your order goes to the market, for a buy you pay the higher ask price. BUT, your strategy might think you have been filled at the bid price. That is what I am calling slippage - the difference between the real money fill price and the strategy fill price.

Sometimes you'll get real money filled at ask, and the strategy will think you paid the ask, so that would be $0 slippage.
Sometimes you'll get real money filled at ask, and the strategy will think you paid the bid, so that would be $12.5 slippage.
Sometimes slippage can be even greater than that (in a fast market).

And, since you are using market orders on both entry and exit, you could easily be hit on both sides.

So, the net impact of slippage on your particular strategy ($30 average profit per trade before slippage) is HUGE.

Thank you for you time and the advice, i appreciated, i need reevaluate the strategy, with 1 in slippage the strategy is very diferent, annex photo.

Regards

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  #14 (permalink)
 kevinkdog   is a Vendor
 
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walter739 View Post
Thank you for you time and the advice, i appreciated, i need reevaluate the strategy, with 1 in slippage the strategy is very diferent, annex photo.

Regards

"1 in slippage" - is that dollars, or ticks?

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  #15 (permalink)
walter739
Caracas
 
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kevinkdog View Post
"1 in slippage" - is that dollars, or ticks?

Is in ticks.

One tick less in the exit
One tick more in the entry

How you can write, sometimes the order can be entry in the bid price but no ever, if i wish a more real and safe backtest i need slippage.

Thank you , this advice can be save me learn this for the bad .

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  #16 (permalink)
 Sysmet 
Київ
 
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Test your strategy with live simulation mode for 1 month, then export all trades and compare them to your backtest data for the same period of time. There will be differences in entries and exits between live and backtest — analyze them and make adjustments. Consider limit orders for regular entries/exits to eliminate slippage, if it fits your strategy.

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  #17 (permalink)
 IFeelLikeNeo   is a Vendor
 
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Also... add your trade costs; mine are around $2.75. That makes a difference to a backtest that trades 1,000 times or more, though much less than the essential slippage of course.

Also... buy and read Kevin Davey's book "Building Winning Algorithmic Trading Systems". It covers almost all of the biggest pitfalls you're coming across, including the ones explained here.

Testing on blind periods (either manually or using your platform's 'walkforward' mode) is also essential.

Pick a random spot on your equity curve. Imagine you had just started trading at that point. How long before you made money? Now do that two or three more times. Could you have happily traded through the ensuing 3, 6, 9, 12 months?

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  #18 (permalink)
 SidewalkAerobics 
Los Angels
 
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Your average profit per trade without slippage is $31. With a couple of ticks of slips (-$25) this leaves $6 per trade.

Your largest loss is over $7,000 and will increase as you add slippage, and no fills for some limit orders. (Try using 10% of limit entry winners not filled for backtesting. Also a tick of slippage for each leg of a market order.)

The biggest hurdle will be to enter on a limit rather than market. Limits don't always get filled and market entries create slippage between the bid and ask.

Keep us updated as you generate a report with slippage. Best wishes, your hard work is showing.

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  #19 (permalink)
 T1234 
Nashua NH
 
Experience: Intermediate
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walter739 View Post
Hello, i build a strategy with ES mini, I test it in simulted mode and the entrys work fine. But i have doubts before use in real time and need advices for check weak points. I see the graph good but maybe i have dont see something what experts can see bad.

- I backtest with mode merged back adjusted, but i backtest too in merged non back adjusted and dont change much in the results.
- I wish trade (1) ES mini, the drawdown of 18.000$, in the experiencie, can be supportable or it is too much for 1 Es mini ?
- The time for recover is 328 days, in the experiencie, can be normal for a strategy 15 min ?
- I adjust 6 paramethers for this results, included open and close time. It is too many parameters for a simple strategy?
- For expert eyes the result of strategy look good o have many weak points ?


Please I need advices for read and apply correctly backtest.

I annex photos of the results.


Did you consider running this in SIM for a while, to see if your results match?

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  #20 (permalink)
ePing
Hayden + Idaho/USA
 
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To help prove out your strategy, minimize damage to your account, and provide confidence going forward, recommend trading your strategy live on the Micro E-Mini S&P (MES) or a while ... maybe a week or two. MES has the same underlying chart as ES so your strategy should perform (close to) the same on each. If it does well on MES, then roll it up to ES. Nothing like trading a strategy live to learn what it can really do. Cheers.

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Last Updated on October 13, 2020


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