I am new to trading (6 mos.) and especially new to automated trading. I have been experimenting with Tradestation and put together what seems to be a good strategy. I have attached the equity curve for the last 12 months. The strategy trades 2 contracts on the S&P e-mini. The performance report shows a $64,000 profit with a max drawdown of $3,800 for the last 12 months. The 24 month performance is $96,000 with a $5,300 drawdown. The strategy basically takes advantage of large daily swings which seems to be the present state and could be for some time. I am not so naive to think I came up with some brilliant strategy. I suspect that backtesting and optimizing can allow anyone to come up with a great equity curve....for the past. Without attacking my newbieness (is that a word?), I would love some feedback on why I should be wary. Thanks!
help with equity curve
- Thread starter jlo1958jets
- Start date
[/QUOTE].........why I should be wary.[/QUOTE]
1) When will you feel confident enough to trade the method?
2) Your method is built around the "past". What will you do if the market deviates strongly from what you "expect" it to do?
3) Do you even have enough money to establish a trading account that can comfortably margin the contract(s) you want to trade?
4) How do you believe you'll deal with drawdowns, especially large drawdowns?
5) Your method may be "optimized" towards a strongly trending environment. You should get chopped-up if the market stagnates or becomes range-bound.
1) When will you feel confident enough to trade the method?
2) Your method is built around the "past". What will you do if the market deviates strongly from what you "expect" it to do?
3) Do you even have enough money to establish a trading account that can comfortably margin the contract(s) you want to trade?
4) How do you believe you'll deal with drawdowns, especially large drawdowns?
5) Your method may be "optimized" towards a strongly trending environment. You should get chopped-up if the market stagnates or becomes range-bound.
thanks for the reply!
All very good questions. I'm not sure how I'll react when things are down. I am wondering if I will see a "flattening" of the equity curve or just a sharp drop if market volatility changes. Seems like an account with $10k would be sufficient, at least based on the past 18 months. Of course, with my luck, the moment I go "live" with this strategy, IF I decide to go live, is when market conditions and daily swings would change against me.
All very good questions. I'm not sure how I'll react when things are down. I am wondering if I will see a "flattening" of the equity curve or just a sharp drop if market volatility changes. Seems like an account with $10k would be sufficient, at least based on the past 18 months. Of course, with my luck, the moment I go "live" with this strategy, IF I decide to go live, is when market conditions and daily swings would change against me.
Check your code for errors....
Your equity curve is nice but:
-Forget about trading 2 lots, 1 lot is enough for something you can't judge performances in real time.
- You don't have much trades
- You only have limited datas
- Last year was good for any trend system. 2009 can be different.
- Is your system based on some fundamental natural behaviour of this instrument or market microstructure or is it just a bunch of indicators( price derivated ) put together? This is perhaps the most important aspect.
-Forget about trading 2 lots, 1 lot is enough for something you can't judge performances in real time.
- You don't have much trades
- You only have limited datas
- Last year was good for any trend system. 2009 can be different.
- Is your system based on some fundamental natural behaviour of this instrument or market microstructure or is it just a bunch of indicators( price derivated ) put together? This is perhaps the most important aspect.
10K trading two E-Mini contracts is not sufficient. What is the performance of this method over the lifetime of the e-mini contract?
I have been trading automation many years. Here are just a few of the many important things to keep in mind (said a little different than the others):
1. All Strategies have market characteristics â Love volatility or hate volatility, trade trends or love the swings⦠Watch out that you donât run out market characteristics.
2. Equity curve means little⦠Testing in similar market conditions tells the true story of how live trading may work (walk forward or out-of-sample tests).
3. A little paper trading can answer questions ⦠It wonât teach about trading. But it will show you what you forgot to program.
4 Prepare for contingencies⦠Many strategies donât work. Market may have changed or who knows. But know when to get out of a strategy before live trading starts. And try again. All it takes is one good system and you are hooked.
5. Donât shoot for the moon until you have expected value ⦠Trade with the smallest unit (1 contract or 100 shares) available to start. Establish what to expect (expected value). Gradually and I mean gradually increase units of trade. This is what as meant by getting comfortable.