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Taking a Trading System Live


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Taking a Trading System Live

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  #501 (permalink)
Legendary Market Wizard
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Below are the results through Week 49 of live trading. Very boring, nothing to speak of.

So, what exactly is going on with this system? Is it broken? Obviously, it is not doing what it should - can this be explained?


In my mind, this breakeven performance the past few months comes down to this - lack of trades, and smaller moves on trades.
The "day" strategy in this system - the strategy that produces most of the big profits - historically averaged 8.6 trades per month.

In 2014, this system has averaged 4.2 trades per month about half of its historical average.
Plus, the last few months have really been dead. July has yielded only 1 of the "day" strategy signals.


But, you say, if it is taking half of the trades, the profit should be half of normal, not breakeven. Why is that?


Good question. It all comes down to volatility. The system (and really, most systems), needs volatility to 1) produce signals and 2) produce good price movement when those signals are generated. So, low volatility is creating fewer opportunities, and the opportunities it does create are only small ones.

If, and when, the volatility picks up, I'd expect performance to pick up too. In the meantime, I'll just keep being bored while trading this system.







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  #502 (permalink)
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This system is a good reason why you want to trade multiple systems.

If I was only trading this system, I'd probably have switched to another system.

By trading multiple systems, I can afford to have a couple underperform for a time, since there will usually be a couple that overperform. But, I never know which ones will do what.

In general, if I was trading 6 systems, in any given year this is what I'd expect.

1-2 would underperform to expectation
1-2 would be right at what I expect
1-2 would be above my expectations

Overall, they'd add up to be right around my expectations. Obviously, it doesn;t always happen that way, but I think you can see the idea.

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  #503 (permalink)
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Hello Kevin, @ kevinkdog

I really have enjoyed reading your posts, they have drastically enriched my entire understanding on what backtesting is.

I also read all 15 Steps of how to backtest in your blog.

I do not have access to Tradestation (I'm on a tight budget), so my question to you is it absolutely mandatory to have backtesting software? Especially, since there are so many flaws and restrictions in backtesting software (some models can not even be backtested; such as ACD setups).

Could I perhaps simply visually go through 50-100 trades and record them manually in Excel based on my set entry and exit rules? ( I am aware it is more laborius than using a backtesting program and hitting the button).

I am also a 'mechanical' trader, still doggedly determined to becoming a successful trader.

Looking forward to seeing the awesome new products rolling out of your factory!

Thank You,

BF.

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  #504 (permalink)
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budfox View Post
Hello Kevin, @ kevinkdog

I really have enjoyed reading your posts, they have drastically enriched my entire understanding on what backtesting is.

I also read all 15 Steps of how to backtest in your blog.

I do not have access to Tradestation (I'm on a tight budget), so my question to you is it absolutely mandatory to have backtesting software? Especially, since there are so many flaws and restrictions in backtesting software (some models can not even be backtested; such as ACD setups).

Could I perhaps simply visually go through 50-100 trades and record them manually in Excel based on my set entry and exit rules? ( I am aware it is more laborius than using a backtesting program and hitting the button).

I am also a 'mechanical' trader, still doggedly determined to becoming a successful trader.

Looking forward to seeing the awesome new products rolling out of your factory!

Thank You,

BF.


Hi Bud -

Thanks for the kind words - I appreciate it!

I'm not sure if they still do, but Ninja used to be free, with free end of day data, if you are just testing, not actually trading. So, maybe that is an option?


I would not say that exploits/tricks/restrictions in trading software is a good reason to avoid it. The good point seriously outweigh the bad.

You can test by hand, but be very careful. It is VERY easy to make mistakes, either intentionally or unintentionally. And for some reasons, the mistakes usually make a strategy look better than it really is.

Kevin

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  #505 (permalink)
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kevinkdog View Post
I'm not sure if they still do, but Ninja used to be free, with free end of day data, if you are just testing, not actually trading. So, maybe that is an option?

They do. You can download it free from their website, and daily data (EOD only) is provided free from their Kinetick service.

Just FYI.

Bob.

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  #506 (permalink)
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bobwest View Post
They do. You can download it free from their website, and daily data (EOD only) is provided free from their Kinetick service.

Just FYI.

Bob.

Would anyone know if Sierra Charts has a similiar strategy analyzer such as the one NT has?

Thanks

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  #507 (permalink)
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The snorefest continues...

As you can see, the trading results have been flat for a couple of months. What has caused this? Is the system "broken?"

The bottom chart - Weekly Average True Range - tells the story well. Basically volatility is down. In fact, it is down to levels unseen in the past 10 years. My Euro systems, like most trading systems, thrive on volatility. When there is no volatility there is no opportunity.

In my Euro Day strategy, I got only 1 signal the WHOLE month of July. And the gross profit of that trade was +1 tick ($12.50). HOW CRAZY IS THAT?!?!

If this was the only system I was trading, or the only market, I'd be screwed. That is why you'll hear me say over and over "diversification is key." I can afford to carry a flatlining strategy like this one, in the eventual event volatility picks up.

Of course, the system still might hit the "system quit" drawdown, in which case I'll put the system on hiatus.

I expect once volatility picks up, as it eventually will, the Euro strategies in the book will start to perform better. At the very least, they will start taking trades again!








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  #508 (permalink)
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This strategy is just limping along, making very few trades, and the ones it does make are usually losers...





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  #509 (permalink)
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I just read your book cover-to-cover and will definitely be re-reading parts, as it is one of the better books I've come across for developing a trading system. Thanks for writing it. It is puzzling that the returns for Euro Day & Night are flat. During the backtesting & walk-forward, there must have been times when the market was flat...can you isolate these times and figure what your expected returns should be for flat markets or is it not worth it? I just wonder if market volatility is the issue or maybe something else.

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  #510 (permalink)
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SidJ View Post
I just read your book cover-to-cover and will definitely be re-reading parts, as it is one of the better books I've come across for developing a trading system. Thanks for writing it. It is puzzling that the returns for Euro Day & Night are flat. During the backtesting & walk-forward, there must have been times when the market was flat...can you isolate these times and figure what your expected returns should be for flat markets or is it not worth it? I just wonder if market volatility is the issue or maybe something else.

Thanks. I hope you decide to review it on Amazon - your review would definitely help others.

The Euro has been in a terrible funk lately, and my "day" strategy is just not taking enough trades (no opportunities).

Here is a chart that shows how Average True Range is at an all time low for the Euro...





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