HFT, and is backtesting helpful or harmful?

[Bob111]

have you been able to live on trading forex? or let says SP500 futures? i've made a decent living trading that junk you are talking about(low liquidity stocks). nothing fancy,but back i a day-six figures a year,without lifting my ass of the chair..my point is-when you trade your super liquid,super leveraged securities-you compete with a whole entire world. with best,brightest and fastest.
when you trade something small and not so liquid-you compete with a few. not necessarily make it easier,but at least i can get a better understanding on what is going on. hope this helps

Stick to high volume/liquidity financial instruments like the Forex and you will immediately notice the difference

the only difference i know thru a decade of my own research and development is that it's impossible for me to come up with something(trading system) that i like on those,mentioned by you above(forex,futures) i like slow,steady, market neutral grinding,where i can finish almost every day with a positive PnL. i guess i'm spoiled..

 

[eurusdzn]

One can apply a simple test strategy to mega and then to micro cap stocks and see where
for a single day , the results of the test on the micro caps is better.(fading panic)
But, the real traders here are saying the test is bullshit because you will never get filled on micro/small caps in these new days of HFT.
At least that is a simple example of whati am hearing.

 

[xelite777]

Back testing does not work well because it does not take into account how bars are formed

Excuse me??

the mood of the markets

What mood??

and the general mechanics of the markets

What general mechanics?? Markets go up, down and sideways, that's it. That's all they have been doing for centuries.

. It does and can work but there is information missing.

Give your backtest sofware 20 years of historical data and it will immediately tell you if your trading idea is profitable or if you are just kidding yourself (and making your broker richer), simple as that.

The best thing to do is let a strategy run on a demo account to see the results as they happen in different market conditions.

Sure you can do that too, but then you need to demo test for at least 10 years before you can draw any statistically accurate conclusions about the profitability of your system. Do you really want to demo test until 2024?

Because only total amateurs demo test for a month and then say "Hey look, my system is working".

 

[Soon2Bgreat]

Yep, risk your money NOW, and worry about the results LATER, that's their motto.

And they dare to call themselves traders!

Of course, that's how it works - there are no guarantees. "You pays your money and you takes your chances".

...to a similar point. When you trade you have one of two choices (buy/sell). Does the person who buys with the knowledge and 'edge' of 175 years of backtesting have an advantage over the retail clown who hit the buy button instead of the sell button?

 

[Redneck]

Off topic discussion from http://www.elitetrader.com/vb/showthread.php?t=283227 continued...

There are two lively debates happening here.
1) Does HFT really affect daytraders PnL?
2) Is backtesting helpful for a new (unprofitable) daytrader?

There's a lot to discuss on both points, which I will add my thoughts a bit later. In the meantime post your thoughts...

jmo

1.) HFT is more noticeable.., and induces more volatility (crap PA) during low volume times... when volume is high / high-ish - not a factor


2.) Never has been for me - static charts are dead to me.., not to mention tomorrow is always a different day

realtime; a signal - is not a signal - till it a signal

in hindsight (back testing); all signals - are signals

Not to mention the texture lost (how the PA was formed / is forming) = like reading sentences sans punctuation (simply words on paper)

RN

 

[xelite777]

have you been able to live on trading forex?

Yes.

Forex is by far the most liquid market on earth, period. Plus it gives me plenty of daily action, sometimes more than I can chew. And forget about poor fills and slippage, they are virtually nonexistent.

 

[xelite777]

"You pays your money and you takes your chances".

Here is a trading idea : BUY the S&P 500 futures if Tuesday's open is higher than Monday's high. Stop is Monday's low. Liquidate the position on Friday at 1PM (EST).

Now, would you immediately trade this system with real cash?

Or would say something like this:

"Hey, wait a minute, let's see if this trading idea is profitable first, let's test it with historical data from January 2000 to April 2014, see if it REALLY makes money, before risking my trading capital".

So, what would you do? Seriously.

 

[Soon2Bgreat]

So, what would you do? Seriously.

In hindsight, and with the knowledge of a backtest I would've stayed out of this conversation.

 

[Bob111]

Yes.

Forex is by far the most liquid market on earth, period. Plus it gives me plenty of daily action, sometimes more than I can chew. And forget about poor fills and slippage, they are virtually nonexistent.

most liquid market on earth comes with plenty of variables, where in stuff that i use to trade- very few. which one ,logically, should be easier to trade profitably for trader of every level?
btw-if you are living large and have more action every day than you can chew-why do you even care about all this stuff like HFT, backtesting etc?

 

[xelite777]

in hindsight (back testing); all signals - are signals

RN

What do you mean by "all signals are signals", Redneck?