Evaluation of Backtested System Results

Usually the win size will not correspond to a normal distribution. If you're cutting losses short and letting profits run, then you should have some outlier trades in the win size distribution. For the test to be valid you need to eliminate the outlier's. I've found that removing the top 5% winning trades (best 5 out of each 100), has been enough to move the distribution to a more normal bell curve.
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I have found in examining the results of my actual trades that removing the top 10% actually has put me into the breakeven/slightly negative category.

What does it mean when all of a systems profits come from 10% of the winning trades? That 10% of winning trades actually represents 5% of all trades. The other 90% of winning trades balance out all trades that result in breakeven or negative results.
 
then it's easy, just trade the most profitable ones ...

though this is joking, it contains some truth, namely to analyse if specific market conditions, like vola, Ma slope, relative daily range correlate with win amount.


peace
 
then it's easy, just trade the most profitable ones ...

though this is joking, it contains some truth, namely to analyse if specific market conditions, like vola, Ma slope, relative daily range correlate with win amount.
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These results represent the best tools that one system produces in all different types of markets. The point is not to change the system. It's a winning system. My point is that statistically it doesn't follow a bell curve.
 
Quote from spreadem:



What does it mean when all of a systems profits come from 10% of the winning trades? That 10% of winning trades actually represents 5% of all trades. The other 90% of winning trades balance out all trades that result in breakeven or negative results.
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Regarding the 3D graph, your system will show a peak and possibly you chose the parameters that produce a peak like it going forward. It is generally considered much more likely to succeed if you pick parameters that keep you away from the peak and produce a nice smoothly increasing profit curve, with less dependence on a few good trades.

Max
 
hmmm......

What kind of time frame do you develop systems? Is it a Daytrading system or does it hold position overnight?

Good Trade.

Trend
 
What kind of time frame do you develop systems? Is it a Daytrading system or does it hold position overnight?
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Daytrading system

This daytrading system is designed as a very low risk system.
 
Spreadem,

I've been trading and developing day trading system. My systems generate an average of one trade per day. Commission and slippage is very hard to overcome when I trade more often.

How many trades do you generate a day on average?

Good Trade.

Trend:)
 
Quote from trend456:

One thing I recognize which is a common sense to the experienced is most developers forget to evaluate there own psychology.

Most traders I've met who developed systems that don't work in real life tend to optimize there own life. These fellows naturally optimize or develop systems based on there curve fit goal and come with a system which is curve fit. It's interesting how psychology plays an important role in developing systems.

Why? Maybe satisfaction...?!

I wanted to say this so that I don't get curve fit answer. Maybe I should move this thread to the journal section.

What do you guys think?

Good Trade!

Trend:)
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Beautifully said! Ya gotta feel the system, ya just gotta feel it.

PTR
 
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