How I Backtest - Traders Hideout | futures io social day trading
futures io futures trading

How I Backtest
Updated: Views / Replies:2,356 / 3
Created: by GaryD Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 100,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Thread Tools

How I Backtest

User requested to be banned
Orlando, Florida
Trading Experience: None
Platform: shoes
Favorite Futures: happy
GaryD's Avatar
Posts: 6,462 since May 2011
Thanks: 2,090 given, 5,057 received

How I Backtest

Backtesting can be a valuable source of information. It also leads a lot of traders headed down the wrong path. I have read some posts lately regarding automation and backtesting and decided to share some of the process of how I approach it. This will not be a "how to trade" example, or show an exact trade system, but just offer a view into another trader's head of how to use backtesting.

I am a purely discretionary trader. I do not use any sort of automation. I do not have buy/sell signals that I believe should be taken every time they trigger. The way I approach backtesting is it allows me to know more about market movement. I digest the information, take indicators that keep me aware of the information I have learned, and then combine that with other information and experience to decide when to take a trade.

Now that I have lost the interest of possibly the majority of readers...

I trade mostly crude oil, and I like to watch 6 and 9 range charts in addition to time based. I find that when I use range charts, certain patterns re-appear that moving averages can help identify. I like T3 moving averages on range charts because, in addition to having backtested well, they respond very well visually.

When I backtest, my initial run is based on Maximum Net Profit, and I am looking for 50-60 results to go through. I use very wide range settings, like 30 though 300 at intervals of 30, to just try to locate a "sweet spot" in each of the moving averages. I use "Genetic" testing on initial passes to keep the backtest time limited in the initial broad passes. After I have found some tighter criteria, I then limit the range of optimizing and switch to standard backtesting.

As the testing continues, I shift the backtest priority to issues other than maximum profitability. Some personal favorites are Maximum Profit Factor and Minimum Drawdown, but there are several things to consider depending on what the initial runs showed.

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

The image above shows a test of 7 different T3 moving averages. Some of them work together to provide a trade entry, two work together to show an optimized reversal point, two work to create an alternate trade exit (the exit can also be a setup in the reverse direction or a stop loss). The settings shown above are what I determined were the most beneficial to me after running through the entire backtest process. Again, this started with a very broad sweep.

Below is what this set of averages looks like on a 6-range chart, labeled to show how they work together. I have shown two possible trade triggers, one short and one long, noted by red/green arrows

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

The way I ultimately decided on those exact settings;

1) I took the information from my initial passes, distilled it down to much tighter ranges per moving average, and exported to MS Excel. I use excel to sort by Win Loss Ratio and Profit Factor and Max Drawdown until I find what I am looking for. The Excel image as I was finishing my work there is shown below.

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

2) I went back into Ninja Trader and ran the standard backtesting on the selections I had focused on in Excel, and looked at the following 3 priorities;

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

All looked good to me, based on what I was wanting to know. You may have already noticed that the Percentage Profitable is not what you might agree with for acceptable criteria. I look for profit that is at a minimum 2x loss. I pay attention to Win Percentage, but do not necessarily prioritize it. I want to know what a 2x win or better looks like. I'll explain further down.

3) I then drill down to see if there is anything else to be learned from the backtest. What I saw was, when viewing the Day of Week, it shows Wednesdays showed the worst performance. That seemed logical to me immediately, EIA Report is often a trend changer for crude oil (typically 10:30am EST on Wednesdays).

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

I also wanted to see if market open, news reports, after hours, 2:30pm EST close, 5:15pm EST close had any affect on performance.

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Now, back to the 6-range chart. Should I have taken both the long and the short trades? Should I have chosen one over the other? Having put all of the effort into backtesting, optimizing, color-coding, should I have felt confident about taking those trades based on reward to risk?

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

The answer is, I took neither.

That is where the discretionary part takes over. I wound up taking a long trade but passing on the earlier two.

1) Crude had taken a massive nosedive the day before, the overall mood was down. There is a lot of potential profit built up in the market on the short side.

2) The chart shown is on a Friday. Futiures stay open 23 hours a day, EXCEPT at the Friday close, they don't re-open until 6pm Sunday night EST. Nearly all traders have some version of fear.

3) To the left and right of the green arrow on the 6-range, we have a minor inverted head and shoulders pattern, suggesting support had taken hold for the day, and shorts might get trapped.

I did eventually enter a long trade, towards the end of the day when I felt crude had told me all it was going to say. The entry location is shown in the chart below. Note that based on the moving averages, the entry still met all of the criteria. However, that entry location seemed like the less obvious point than the ones in the 6-range chart shown previously.

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Getting back to the Percentage Profitable of only 33%. That percentage is only if I traded that setup in a vacuum, without any additional information. If you want to increase your real world odds, you have to take the blinders off. No matter what the computer says, be aware. There was far more to the story.

It's Friday, with shorts most likely stuck at the end of the live pit, selling volume had dried up, pit close approaching, support looking ominous to short traders who were still hoping for more, potential double bottom with a prior support area, the prior high on a minor scale (6 range) after the H&S just was broken to the upside...

What were my percentage odds then? I couldn't tell you. But I knew, that was a darn good trade.

I took that trade live on (formerly BMT) and posted my thoughts about it as it unfolded. Here is a link the approximately start of that trade as it occured.

If you follow that link you may think, "Now wait, where are all the moving averages? That chart looks nothing like the one that was backtested! This guy is full of it!" Well, I don't use the exact T3s from the backtest, but I use T3s that are close. Truthfully, I adjusted them visually based on typical movemtn rather than optimum conditions.

And yes, I did cherry pick that example, as that trade could have just as easliy failed. Trading comes with no guarantees.

But, anyway, that's how I backtest.

The example backtest that was run on moving averages was only a single piece to the puzzle. I use that in combination with analysis of several other timeframes, like what is shown below.

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

On a 60 minute timeframe, we had a potential major (relative to 60 minute charts) double bottom. That was surely catching some attention at the end of day on Friday as well. If you are trying to trade range charts, tick charts, volume charts, that is a very good thing to do. It gives you a microscopic view, which helps minimize risk and spot opportunity faster. But what really improves your odds is only taking the microscopic signal when the macro view aligns with it.

What I believe; use backtesting to learn your market, use what you learn to complement something else you have learned. Backtest hundreds of things until it all starts to come together in a single understanding.

Optimize yourself and your understanding of the market you choose to trade.

Good Trading and STAY SAFE!!

Last edited by GaryD; December 15th, 2011 at 01:01 AM. Reason: Typos & hoping to improve the intended message
The following 14 users say Thank You to GaryD for this post:
Quick Summary
Quick Summary Post

Quick Summary is created and edited by users like you... Add FAQ's, Links and other Relevant Information by clicking the edit button in the lower right hand corner of this message.

Site Administrator
Manta, Ecuador
Trading Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
Big Mike's Avatar
Posts: 46,930 since Jun 2009
Thanks: 29,918 given, 86,954 received

Just now had some time to read your post.

Thanks for sharing!

In fact, it is a similar idea to what I've been doing for a while myself and finally recently created a thread to try and document it and involve some members (many who posses math skills I lack) to try and help us all.

My thread is about taking concepts some of us think improve our trading (common risk and trade management ideas, some simple examples including moving stop to breakeven, or setting a risk/reward ratio, avoiding volatility, setting maximum risk limits, etc) and then backtesting those over large periods using a random signal generator so the focus is purely on the risk/trade management, and zero emphasis placed on the entry signal.

I hope you will continue posting in the thread, looking forward to more.


Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

The following user says Thank You to Big Mike for this post:
Helsinki, Finland
Trading Experience: Advanced
Platform: NT8
Broker/Data: NTB
Favorite Futures: ES, CL
gain247's Avatar
Posts: 134 since Apr 2010
Thanks: 125 given, 122 received

Thanks again, Gary - that was an excellent, excellent post! I also thank you for continuosly sharing your vast experience and methods using 'regular' threads which can be read by anybody here at (formerly BMT), not only 'elite' members. I find some golden gems everyday from your posts eventhough my approach to market and CL trading method is quite different but I find myself gradually learning about a new dimension as how to better read the markets and take the opportunities with bigger trends.


The following user says Thank You to gain247 for this post:


futures io > > > How I Backtest
Thread Tools

Upcoming Webinars and Events (4:30PM ET unless noted)

Journal Challenge $1600 in Prizes & Free Journalytix for all participants!


3 Excellent Entries, and How To Automate Them w/Kevin Davey

Feb 21

The Driving Force Behind the Market w/Earn2Trade

Mar 5

TBA w/Stage5 & iSystems

Mar 12

TBA w/John Grady @ No BS Day Trading

Mar 19

Day Trading Oil Futures: Reducing Risk & Increasing Profits w/DTN IQFeed

Mar 26

Similar Threads
Thread Thread Starter Forum Replies Last Post
NYSE fees in a Backtest jakeglb Stocks and ETFs Trading 2 December 11th, 2010 03:03 PM
jtEconNews and similars for Backtest? Trader.Jon NinjaTrader Programming 9 November 22nd, 2010 04:56 PM
Anyone want to backtest!!!!!!! incometrade Traders Hideout 7 September 22nd, 2010 10:42 PM
Multitimeframe backtest chart MyTraderAdvisor NinjaTrader Programming 3 July 25th, 2010 04:43 PM
Backtest Big Mike Terms (Glossary) 0 June 27th, 2010 02:28 PM

6 range, backtest, backtesting, buy, cl, cl trading, coding, crude, crude oil, dom, double bottom, dow, drawdown, eia report, elite, es, futures, genetic_optimizer, head and shoulders, how to, how to trade, indicators, information, ninja, ninja trader, patterns, profitable, range charts, reverse, reward, reward to risk, risk/reward, short, signal, signals, stop loss, support, switch, t3, tick, tick charts, trade entry, trade exit, trade live, trade management, trade system, trading, trading method, trend, trends, volatility, volume, win percentage

All times are GMT -4. The time now is 05:07 AM. (this page content is cached, log in for real-time version)

Copyright © 2019 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432 WhatsApp Business,
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2019-02-22 in 0.24 seconds with 14 queries on phoenix