Andy's Day and Position Trading Journal

Hi Andy

Been reading your journal and think its great, glad to see you are going back to trading larger timeframes, i personally find that RH and 123's are much better on a larger timeframe.

Good luck with your trades.
SAV
 
Hi Fred,

I am not doing so much back testing so far. I am starting now to find out how to use backtesting software.

For the 123's and RH's I do not need so much back testing I guess but for the new strategies I want to test it makes definitely sense.

How much data do you need? Well, I guess it really depends on the time frame you are trading because (as you said already) markets are changing very often. I guess on a 60 min strategy you should look over the last 6 - 12 month but you should also test your strategy on paper. Sometimes it looks nice in the computer but terrible when you start trading it.

happy trading

Andy
 
There are a few factors that you need to consider when determining the period for backtesting your trading system:
  • Trade frequency
    How many trades per day does your trading system generate? It’s not important how long you backtest a trading system; it’s important that you receive enough trades to make statistically valid assumptions (see below). If your trading system generates three trades per day, i.e. 600 trades per year, then a year of testing gives you enough data to make reliable assumptions. But if your trading system generates only three trades per month, i.e. 36 trades per year, then you should backtest a couple of years to receive reliable data.
  • Underlying contract
    You must consider the characteristics of the underlying contract. The chart below shows the average daily volume of the e-mini S&P:
    e-mini_SP_average_daily_vol.jpg

    It doesn’t make sense to backtest a trading system for the e-mini S&P before 1999, because the contract simply didn't exist! In my opinion it doesn't make sense to backtest an e-mini trading system before 2002 because at that time the market was completely different; less liquidity and different market participants. I believe that a reliable testing period for the e-mini S&P are the years 2002 – 2004.

What is "statistically valid"?
Recently I received an article from a Ph.D in Statistics. He explained the correlation between the sample size and the "margin of error" in the table below. The bigger the sample is the smaller the margin of error, but usually a sample date of 200 trades should be sufficient. If your trading system generates enough trades, then you should use 500 - 600 trades.

table_statistically_valid.JPG


Just my two cents. :)

Markus
 
Quote from Jordan_Andy:

Hi Fred,

I am not doing so much back testing so far. I am starting now to find out how to use backtesting software.

For the 123's and RH's I do not need so much back testing I guess but for the new strategies I want to test it makes definitely sense.

How much data do you need? Well, I guess it really depends on the time frame you are trading because (as you said already) markets are changing very often. I guess on a 60 min strategy you should look over the last 6 - 12 month but you should also test your strategy on paper. Sometimes it looks nice in the computer but terrible when you start trading it.

happy trading

Andy
More...

thanks for the reply andy & markus.

i dont use back testing software, just scroll back the chart by hand

:eek:

a bit cumbersome, but due to the set ups i use - like hooks, i think it would be awkward to program, as many of them are a bit subjective.

thanks
 
Today’s Day Trading – 05/04

Euro FX 60 minutes: 10:20am – Short TTE (RH) at 12950, stop/first target 10 ticks – all out at b/e.

Results of today: +0 ticks (+$0) 1 trade

Here are the results for this month:

May:
Euro FX: -12 ticks (-$150) 3 trades
Mini Russell: +0 ticks (+$0) 1 trade

To be consistent with my recordings I add my monthly summary (hypothetical result due to 2 contracts):

April:
Euro FX: +0 ticks (+0) 19 trades
Mini Dow: -40 ticks (-$200) 15 trade
Mini Russell: +8 ticks (+$80) 12 trades
Mini Russell new method: +48 ticks (+$480) 5 trades

March:
Euro FX: +38 ticks (+$475) 32 trades
Mini Dow: -20 ticks (-$100) 4 trades
Mini Russell: +12 ticks (+$120) 7 trades

February:
Euro FX: +103 ticks (+$1362.50) 37 trades
Mini Dow: -10 ticks (-$50) 13 trades
Mini Russell: +55 ticks (+$550) 12 trades

January:
Euro FX: +76 ticks (+$950) 23 trades
Mini Dow: -46 ticks (-$230) 9 trades
Mini Russell: +120 ticks (+$120) 3 trades
 
Today’s Day Trading – 05/06

Euro FX 60 minutes: 9:20am – Short TTE (RH) at 12850, stop/first target 10 ticks – covered first lot at 12840, second at b/e.

Euro FX 10 minutes: 8:00am – Short TTE (RH) at 12869, stop/first target 6 ticks – all out at 12872 (time stop).

Results of today: +4 ticks (+$20) 2 trades

Here are the results for this month:

May:
Euro FX: -8 ticks (-$100) 5 trades
Mini Russell: +0 ticks (+$0) 1 trade

To be consistent with my recordings I add my monthly summary (hypothetical result due to 2 contracts):

April:
Euro FX: +0 ticks (+0) 19 trades
Mini Dow: -40 ticks (-$200) 15 trade
Mini Russell: +8 ticks (+$80) 12 trades
Mini Russell new method: +48 ticks (+$480) 5 trades

March:
Euro FX: +38 ticks (+$475) 32 trades
Mini Dow: -20 ticks (-$100) 4 trades
Mini Russell: +12 ticks (+$120) 7 trades

February:
Euro FX: +103 ticks (+$1362.50) 37 trades
Mini Dow: -10 ticks (-$50) 13 trades
Mini Russell: +55 ticks (+$550) 12 trades

January:
Euro FX: +76 ticks (+$950) 23 trades
Mini Dow: -46 ticks (-$230) 9 trades
Mini Russell: +120 ticks (+$120) 3 trades
 
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