Backtesting is useless

I'm not. I don't think that the concept of backtesting that I know can help me find a profitable strategy. Maybe I'm just ignorant.

Backtesting and "finding a profitable strategy" are two (or more, depending) separate operations.

Backtesting a bad strategy won't help find a profitable strategy (except to the extent it tells you to pick another strategy to backtest).

Backtesting a good strategy may make the strategy more profitable, or spin off different parameter sets that are geared toward different/specific types of market conditions.
 
I'm not. I don't think that the concept of backtesting that I know can help me find a profitable strategy. Maybe I'm just ignorant.


No, you're fine.

Ask yourself how you arrived at ET. Was it via any of the following?

-WSB Discord
-Reddit
-RH

If so, then yes, you're stupid/ignorant/both.
 
Backtesting and "finding a profitable strategy" are two (or more, depending) separate operations.

Backtesting a bad strategy won't help find a profitable strategy (except to the extent it tells you to pick another strategy to backtest).

Backtesting a good strategy may make the strategy more profitable, or spin off different parameter sets that are geared toward different/specific types of market conditions.

Maybe, but if you adjust your parameters to make it more profitable, isn't that a biased test?.

How can you make those adjustment to your strategy if you don't know what the next market would be?
 
Probably.

What's your actual experience in the market? Do you have practical experience or only book knowledge? Have you ever back-tested anything at all? Do you have access to highly detailed datasets of the market(s) you're looking at?

Back-testing is just as much about discovering what doesn't work as to what does work. Answering one question usually gives 10 new questions. It's a matter of problem solving.

The truth is that the market is full of patterns which repeats themselves. These patterns may or may not resemble what's presented in popular books. They may be based on price patterns or they may be statistical patterns which can't be easily identified using charts alone.

Roughly speaking - every day is a variation of a common theme and there's only so many in a given market. For example today was an Up Day. Yesterday, too. Monday as well.

Back-testing/back-checking and endlessly studying your chosen market is the key to actually learning your market as it is. For most people and especially the lonely retail trader this takes years. Eventually, the market becomes a familiar place and to some degree predictable.

I never believed the markets to be random and early on found proof they weren't, so for me I decided the pursuit was worth it, although it's possible I would have chosen another path if I knew how demanding this was.

PS: While I subscribe to the school of 'predicting' there's other successful traders who merely 'follow price' instead. At the end of the day - they're predicting too, IMO.

How did you find proof that the markets are not random?

Can you give an example of one of those patterns?
 
Money management rules.


Money management rules are applied to a system or strategy. Money management on its own does not generate money. It only helps in finding out how to protect the money invested.
You first need a strategy and then apply money management rules on it. The rules can be different for different strategies, depending on the "behavior" of the strategy.
 
Money management rules are applied to a system or strategy. Money management on its own does not generate money. It only helps in finding out how to protect the money invested.
You first need a strategy and then apply money management rules on it. The rules can be different for different strategies, depending on the "behavior" of the strategy.

Indeed you need a strategy but you can't know for sure that it can make money by backtesting it. Are you familiar with the survival bias?
 
Indeed you need a strategy but you can't know for sure that it can make money by backtesting it. Are you familiar with the survival bias?

I survive already 2 decades as a daytrader. So I have a fairly good idea about the "survival bias".

Thanks to years of backtesting I have a fairly good idea about the expectancy of my trading and I know that I will always make money if the number of trades are statistically relevant.

The problem is not the backtesting, the problem is the (bad/weak) strategy that is backtested.
If backtesting does not give you comparable results as real trading, you should make a better strategy. Don't blame it on the backtest. You are the problem, as you created the strategy.

A good strategy will in real trading give more or less the same results as in backtesting. The reason why is very simple: A good strategy works in ANY market condition.
If your backtest gives different results it means it only works in certain conditions, so not reliable.
 
Back
Top