if backtesting works, what could go wrong in real trade?

T

traderzhangSan

if a backtesting shows a statistically significantly winning odds, you still could lose using the strategy. what could go wrong?

I can think of the following

1. volatility changed
2. you strategy might only work in bull market, now market direction changed.
 
Quote from traderzhangSan:

if a backtesting shows a statistically significantly winning odds, you still could lose using the strategy. what could go wrong?

I can think of the following

1. volatility changed
2. you strategy might only work in bull market, now market direction changed.
More...

Different market conditions. If you backtest something that looks at a trendy period in the market, if the market conditions change to choppy, that strategy will lose money.
 
News!

Quote from traderzhangSan:

if a backtesting shows a statistically significantly winning odds, you still could lose using the strategy. what could go wrong?

I can think of the following

1. volatility changed
2. you strategy might only work in bull market, now market direction changed.
More...
 
Quote from traderzhangSan:

if a backtesting shows a statistically significantly winning odds, you still could lose using the strategy. what could go wrong?

I can think of the following

1. volatility changed
2. you strategy might only work in bull market, now market direction changed.
More...
if you talking about stocks-a lot could go wrong
i have system that produce a lot of money according to backtesting..in reality i got only 1/10(!) of the numbers from backtesting. it's goes pretty simpe-no fills or lot's of partial fils on winners and losers are all yours.
 
Quote from Bob111:

if you talking about stocks-a lot could go wrong
i have system that produce a lot of money according to backtesting..in reality i got only 1/10(!) of the numbers from backtesting. it's goes pretty simpe-no fills or lot's of partial fils on winners and losers are all yours.
More...


why didn't do manual execution for some time before switching to automation?
 
Quote from traderzhangSan:

That is interesting.

how those firms doing strategy using computer manage news?
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If you have a large enough data sample - news is generally in the market data.

It would also depend on if your strategy is automated or not and the psychology factor gets involved more deeply. If not once real money is on the line things seem to change.
 
Quote from traderzhangSan:

why didn't do manual execution for some time before switching to automation?
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it's doesn't matter if you do it manually or not. for example-if some one can trade through your order(which is happens a lot)-there is nothing you can do about it. or trade at same price but on different exchange. or trade trough dark pool and just post the prices.what are the chances of being filled?
 
because in backtesting, your mind is biased and will always look for a profitable setup. If you study quantum mechanics, you will know how perception changes reality, thus in real life, all ur setups and systems go KAPUT.
 
Quote from MohdSalleh:

because in backtesting, your mind is biased and will always look for a profitable setup. If you study quantum mechanics, you will know how perception changes reality, thus in real life, all ur setups and systems go KAPUT.
More...

not really, you can use a computer program to do backtesting for you. once you define the rules, u never change the rule.
 
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