Confirmation bias or valid procedure?

[nooby_mcnoob]

A black box shouldn’t matter. For example a strategy (whether black box or not) may detect corporate buy-back pattern that applies to one company but not another.
But stocks are different and difficult, so I do trade vast number of stocks using few strategies. Though at the same time I have dozens of strategies per each stock/company, and may still add some of them to strategy pool.

While with futures and forex there may be different trading patterns, for example depending on the weather, airlines buying crude, others hedging against gas, specific banks/countries buying currencies, etc.
I’d expect those patterns to change over time, but nevertheless I get different results using different strategies.
And I hate to refer to just one guy, but Ernie stated that results speak for themselves, even though he and everyone else assumes that using single strategy across multiple instruments sounds more logical.
If your results show something different then this confirms that different strategies may work differently, so no one may even agree on what works best...

Results do speak for themselves

 

[tommcginnis]

That is a mighty big IF. Most people never get to the point of trading profitably. Instead of spending years bouncing from one trading idea to another and losing lots of money looking for profitability, why not apply a bit of science to the trading hypothesis first? Conduct proper backtesting methodology first and see if results in positive expectancy before risking your bankroll.

Why not do this? Because proper backtesting to avoid biases is hard and most people don't know how to do it.

Backtesting only establishes *that* something works, not why.
"Why" is nice! Why is what I'd want to know! Why would let me (most likely) feel comforted in confirming my biases. But I can hang with merely being profitable.

 

[pipeguy]

A method that is valid will work whatever you trade. The Turtle Trading System was used to trade forex, stocks, futures, etc. All showed profitable results. Not to mean you will not have losing trades, just that overall, after all your trades are added up, it shows a profit most years. I had designed a trading system that was hitting 80% winners and substantial gains overall. Of course, my backtest was limited because I was doing it manually which was very tedious. Still, I figured it might be worth testing so, placed actual trades to test it. It was a huge failure. Most of the trades were losers and worst, slippage was even worst! I did not count on the slippage having that huge effect but, it did! Your high win percentage of 60% probably, will not hold up. I highly, suspect it will not hold up for long. Your backtest already show that! Your edge is what matters, not your winning percent. Winning percent means nothing. The average size of your winning trades compared to the average size of the losing trades matter more!

Why so? I mean by averaging you lose some important details about the variance of losing/winning trades which is crucial for leveraged trading.

 

[smallfil]

Why so? I mean by averaging you lose some important details about the variance of losing/winning trades which is crucial for leveraged trading.

When you figure out if you have a trading edge, you compare your average gain versus your average loss. Obviously, you want a bigger average gain, say $800 to an average loss of say $300. It does not affect leverage, why would it? You are just using your past trades to figure out if you have an edge. With your win percentage, plus the average gain and average loss, you can figure out if you have an edge or not. Stock options already have leverage built into it. You want more leverage? Trade forex or futures. Of course, the higher the leverage, the higher the risk!

 

[pipeguy]

Given Entry, Exit, TP and SL is not sufficient data to verify if a system works because you also need leverage and position size to estimate if your position can tolerate drawdown to particular trade SL. This is what I meant, max drawdown per trade and maybe its averaged value is also important to consider.

 

[AlphaLine]

That is a mighty big IF. Most people never get to the point of trading profitably. Instead of spending years bouncing from one trading idea to another and losing lots of money looking for profitability, why not apply a bit of science to the trading hypothesis first? Conduct proper backtesting methodology first and see if results in positive expectancy before risking your bankroll.

Why not do this? Because proper backtesting to avoid biases is hard and most people don't know how to do it.

Bingo!