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Would you run this strategy? 10 year DAX backtest results attached.What do you think?
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Would you run this strategy? 10 year DAX backtest results attached.What do you think?

  #1 (permalink)
Trieste Italy
 
 
Posts: 133 since Feb 2018
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Would you run this strategy? 10 year DAX backtest results attached.What do you think?

Hello everyone,

I came here (futures.io) at the begininning of the year and I've found this place as a very valuable source of information and it helped me a lot with the learning process. From late february I started to learn easylanguage and take some confidence with multichart. Now after almost 4/5 months of daily tests and over 20 developed strategies I finally came up with 2 interesting automated strategies and In this post I like to know your opinion on one of my systems.

I'm actually developing all my strategies over the DAX (eurex exchange) future included this one. All I can say about the entry rules is that the system is actually calculating an initial BIAS (bull, neutral, bear) at the beginning of the day (it can change with some rules) and based on that it make some entries using the previous day VALUE AREA levels.
The system works only intraday during the cash session and ONLY ONE STOP LOSS per day is allowed. There's no limits of consequential gains.

Some hystory about the development process:
I started to develope the stystem over a small backtesting period of 1 year just to see if my edge is right or not and to put down the basic code logic of the signal. I first wrote the BIAS definition code and then all the entry and exit cases... I was satisfied because the test from half 2017 to today was very promising so when the first rough version of the system was ready I tested it over the last5 years and I sadly discovered that is was losing and then barely staying alive from 2013 since the end of 2016. Basically I discoved that it was really profitable only in the last 1 year.
We all know that 1 year of good backtest is NOTHING so I went back to the entry logic and spent some hours modifying and testing all the entry rules, checking the entry levels and testing new patterns and FINALLY I came up with a logic that made the system profitable as I hope in the last 5 years.
After that I spent some time with the optimization. Please note that this system doesn't have so many parameters: it has some variables that define a sort of "profit protection" (If I reach X tick of gain then at least I want to earn X/2 ticks so I place there a stop order) and then there's the stop loss. The interesting thing si that I had those 3 different interesting situations with those value of the stop loss (and the profit protection fixed to points):

SL 25 points I had almost the BEST NET profit possible
SL 15 points I had the Best Profit Factor
SL 10 I had the lowest Drawdown

Just curious because I discovered that 90% of the system performance differencies are based over the STOP LOSS value setting.
In all case the profit factor was around 2 or little higher.

10 YEARS BACKTEST :

So in front of those results it was time to test if over the maximum number of years provided by IQFEED ( 10 years) so I tested it since late 2008 to today leaving the SL at 25.

It really was a pleasure to discover that it was working the same (almost) way in the ealy year that it used to do in the last 5 years. The system as you could see below is profitable every year. The most interesting thing is that it is really profitable in the most of the months with only a few negative losing months. It has maximum loss per day equal to 644,5€ that is 25 point of dax included slippage 1 tick and commissions.
System has been tested over a regular chart with 5 minute bars. It has a resonable maximum DD and it really doesn't have so many negative days. As my first system I was hoping to have something with a maximum affordable loss risk per day and this is something I can deal with.

This year (still don't know when) I'm planning to go live with 1 or 2 strategies and this will be my first automated system trading experience. So I simply wanto to know what do you think about this system based on those backtesting results? Would you go live with it?
Any advice? I just would like some suggestions from automated trading veterans!

Any comment is appreciated,

Regards,

David

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  #2 (permalink)
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  #3 (permalink)
Sydney, NSW, Australia
 
Trading Experience: Intermediate
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amoeba's Avatar
 
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Hi David,

These comments lead me to think it is possible you have accidentally fallen into curve fitting your strategy;


Dvdkite View Post
.....
I was satisfied because the test from half 2017 to today was very promising so when the first rough version of the system was ready I tested it over the last5 years and I sadly discovered that is was losing and then barely staying alive from 2013 since the end of 2016. Basically I discoved that it was really profitable only in the last 1 year.
We all know that 1 year of good backtest is NOTHING so I went back to the entry logic and spent some hours modifying and testing all the entry rules, checking the entry levels and testing new patterns and FINALLY I came up with a logic that made the system profitable as I hope in the last 5 years.
After that I spent some time with the optimization.
........

For system research and testing, I know some traders who will develop on a small historic sample, then test on a out of sample walkforward. If that out of sample walkforward test not produce good results they abandon the original concept and move on to a new idea.

But if you go back to the development data sample and make changes to test again on the forward data, you no longer have out of sample data, and have fitted your results to the whole data set.

There are some really good webinars on this site by fellow autotraders that explore many of these issues, do a search for Kevin Davey, he outlines a very good methodology for developing and testing trading systems, you can also find him on this site @kevinkdog

Don't be discouraged though, I believe Kevin also say's he might get a couple profitable strategies out of 100 ideas. So it is a case of having a solid methodology and continuing the efforts.

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  #4 (permalink)
melbourne victoria australia
 
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Test with real money

If you think it is profitable test with real money!

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  #5 (permalink)
SF, CA/USA
 
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Don't test with real money.
You need to test with historic data you haven't used yet, without changing anything else.
Then, if that works, you need to test it in SIM in real time for 3-6months.
All that before going with live money.

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  #6 (permalink)
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As others say, back test and optimise on a sample of your data only and allow an amount of data to test before and after that optimised period.
So if you have five years of data going back from now then I would choose say three years of data 2015-2017 and test and optimise your strategy on that period. Then run a back test of your chosen system on the year of earlier data for 2014 and see whether the results are comparable, and then forward test on the last seven months of 2018 data and again compare the results. Assuming the results are similar, having that seven months of forward test data of the most recent past, that your methodology wasn't optimised on, means the amount of time you need to sim test it live could be reduced as you really just need to check the system is all actually working properly live, rather than requiring another few months validating the methodology. (Though extra confidence is always good).

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  #7 (permalink)
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jackbravo View Post
Don't test with real money.
You need to test with historic data you haven't used yet, without changing anything else.
Then, if that works, you need to test it in SIM in real time for 3-6months.
All that before going with live money.

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It looks a bit too good to be true .
I'll also run it for 6 months with a live data feed and a demo account, and would backtest the same strategy with a correlated instrument.

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  #8 (permalink)
Sliema+Sliema/Malta
 
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Thanks for posting your back test Dvdkite,

Earlier in the year, you mentioned that you were testing Heiken Ashi bars with your strategies. Does this use normal OHLC bars or HA bars? If they are normal bars then well done. That would be a very impressive result and I would consider moving forward with the strategy. If it does not happen to use a standard bar type, then I would be very careful risking real money.

A good test is to use IB's paper trader for forward testing. If your paper trading statements match what you see in terms of win rate in the MC back tester then go for it.

Best of luck,

Alex

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  #9 (permalink)
Kassel / Germany
 
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What I always do is thoroughly checking entry and exit-points on the chart on one hand and on the other the expectations from my algo. Developing the system you have to have a good understanding regarding the context a trade is getting triggered. So comparing the expectations compared to the actual entry/exit-points is worth a lot. Regarding some common problems even without knowing your strategy one could see on the chart whether you are trapped into a programming problem which causes the great result. Maybe you could post some screenshots with trades.

As you are using Multicharts it could be easy to check whether the strategy is satisfying in live mode or not. Just run the strategy with your broker-feed after applying the correct configurations. Correct configurations and it's no problem to use the real-account, then the trades will occur in your chart and performance report and no trades are forwarded to the broker. Just configure it first, this way I do it for myself and it's a great way to test it before going live with transmitted orders. At the end of the session I always were evaluating the daily outcome of the strategy and comparing it with backtests made after the session for that day.

This way you can achieve the test with out of sample data, which seems necessary.

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  #10 (permalink)
Ireland
 
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So perhaps you would like to tell us some more about this strategy such as the set-up, entry triggers etc.. This way you might let us run a similar strategy to help with the validation process...

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