Could it be this easy?

F

farmerjohn1324

I recently ran a backtest on NinjaTrader on 1minute charts over the past 12 months.

I'm not even going to go into the details of the script because it was one of the preloaded MA scripts that comes included as a sample.

The results were a profit of $30,950 on 1 ES contract ($13,000 maintenance margin, I believe). This is a return of 138%.

Now the obvious answer of "if it was that easy, everyone would do it," I think applies here so I must be missing something.

But I'm not really talking about the details of this particular algorithm. I've seen countless algorithms that backtest to similar or better results.

Can anyone give me specific reason why this wouldn't work this way if traded live? Or specific reasons that it would?
 
farmerjohn1324 said:
I recently ran a backtest on NinjaTrader on 1minute charts over the past 12 months.

I'm not even going to go into the details of the script because it was one of the preloaded MA scripts that comes included as a sample.

The results were a profit of $30,950 on 1 ES contract ($13,000 maintenance margin, I believe). This is a return of 138%.

Now the obvious answer of "if it was that easy, everyone would do it," I think applies here so I must be missing something.

But I'm not really talking about the details of this particular algorithm. I've seen countless algorithms that backtest to similar or better results.

Can anyone give me specific reason why this wouldn't work this way if traded live? Or specific reasons that it would?
More...

Just try it with the minimum position/real money trading...you will not need answers from an anonymous trading forum.

wrbtrader
 
Don’t forget to include fees.
Commission and slippage.

Past 12 months on 1 minute is plenty of data.

Also make sure there is no error in logic.
I mean stuff that aren’t realistic.

Check if there is no margin call in between.

Not sure how NT backtesting engine works,
But I am suspicious that a built in strategy is returning 100% P.A

I don’t know how many parameters there are,
But don’t cherry pick based on performance.

If MA(50) returns 22k
If MA(49) returns 122k
If MA(48) returns 18K

Then MA(49) is simply over fitting,
You won’t be able to reproduce the same.
 
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As @Sekiyo already pointed out, commish and slippage alone will take a big chunk out of your profit if you're using market orders. Also, when backtesting, there's the issue with overfitting. To avoid this, it's better to forward-test or run the algo in a sim for an extended period. You will still need to take fees into consideration. In NT, you can configure commission and slippage.

upload_2022-12-31_12-56-38.png


upload_2022-12-31_12-58-26.png


It's also worth watchin this video



Finally, there's an inherent flaw with a lot of backtest engines on the market. What do I mean? Take a look at this video. The video is about TradingView, but the same limitation he talks about applies to other platforms IMO.

 
schizo said:
As @Sekiyo already pointed out, commish and slippage alone will take a big chunk out of your profit if you're using market orders. Also, when backtesting, there's the issue with overfitting. To avoid this, it's better to forward-test or run the algo in a sim for an extended period. You will still need to take fees into consideration. In NT, you can configure commission and slippage.

View attachment 302758

View attachment 302759

It's also worth watchin this video



Finally, there's an inherent flaw with a lot of backtest engines on the market. What do I mean? Take a look at this video. The video is about TradingView, but the same limitation he talks about applies to other platforms IMO.

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You seem knowledgeable and experienced...

Have you ever personally back tested and decided to run an algorithm that has generated consistent profit? Have you considered it and then decided against it?
 
farmerjohn1324 said:
Have you ever personally back tested and decided to run an algorithm that has generated consistent profit? Have you considered it and then decided against it?
More...
As they say, "When it's too good to be true, it's usually a fake." I personally heed that advice for everything in life, even with backtests.

Hope that helps.
 
On a positive note: Current market conditions are volatile and unusually trendy (compared to past decades). Certain simple algos can work (for now).

On a negative note: Poorly made backtests lie (and unfortunately quite a few vendors do it poorly on purpose) w.r.t. to transaction overhead. A lot of algos look great if you get to buy instantly on the midpoint price in sim but rapidly lose money IRL...
 
I think we've all seen Systems advertised for sale, that boast great results from backtesting, but the Owner fails to come close to in reality.
 
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