Is there an edge here?

[murray t turtle]

what are you guys' thoughts on extensive back-testing? I feel like what @Handle123 says makes sense from a sampling perspective, but what if you're getting on that strategy at the tip of market change that renders your strategy a loser right when you think you have significant evidence that it worked in the past?

Unless of course you believe that a strategy can work forever without tweaks as time goes.

If you believe in continuous improvement over time, do you constantly testing on 10k data points every tweak? Feels like you're always operating on a lag.

%%
Handle123 is right;
because 10,000 days, for example gets a bull + bear cycle, usually.
So no/ dont have to do 10,000 tests every week \once we got it.
Factor in stuff like SEPT sells......................;
+ most OCTobers are bear killers/uptrends.[SPY,spxl.....]
WATCH out for stuff like average SEPT sells pattern , but plenty of SEPTembers are buy months, even though average is a sell/LOL.
AND one year i remember SPXL did 100%; next year not so much@ all,oops!! Real common apple tree+ market pattern = one year super yield,2nd year, not much. 3rd year =super harvest again.ES is a lot like SPXL/UPRO, except dividends.....

 

[SimpleMeLike]

If you look at trade outcome strictly from the standpoint of success/failure there are just 2 outcomes. Assuming market is random that is 50% success rate.

If you add price behavior during the trade, there are 3 possible behaviors:

1. price rotation above entry
2. price rotation below entry
3. price rotation around entry

Based on the above there are 5 outcomes.

View attachment 268695

Given a win rate of about 80%, it seems like every one of the above outcome is randomly distributed. If the profit factor is 1.2, where is the edge coming from most likely (if there is any)? These stats are net fees/commissions

View attachment 268696
View attachment 268697

I understand the limited sampling size, but just wanted to get the discussion going to see if somebody can provide insight into this without really knowing the strategy.

Hello hilmy83,

Great work sir.

Increase your sample trade size to +200 to 500 trades to determine better edge.

 

[hilmy83]

Hello hilmy83,

Great work sir.

Increase your sample trade size to +200 to 500 trades to determine better edge.

thanks. where in texas?

i'll come back to this thread in 2-3 months and revisit this discussion to see if the edge is real or fluke

 

[JSOP]

If you look at trade outcome strictly from the standpoint of success/failure there are just 2 outcomes. Assuming market is random that is 50% success rate.

If you add price behavior during the trade, there are 3 possible behaviors:

1. price rotation above entry
2. price rotation below entry
3. price rotation around entry

Based on the above there are 5 outcomes.

View attachment 268695

Given a win rate of about 80%, it seems like every one of the above outcome is randomly distributed. If the profit factor is 1.2, where is the edge coming from most likely (if there is any)? These stats are net fees/commissions

View attachment 268696
View attachment 268697

I understand the limited sampling size, but just wanted to get the discussion going to see if somebody can provide insight into this without really knowing the strategy.

There should be more price outcomes than 5. And in fact there would be infinite number of outcomes.

 

[David's faith]

I would not care which pattern appears most as a standalone but which pattern is likely to occur on a strong trend, a trading range and so on. Support and resistance fail or hold for a reason. Build on that instead of them failing. You also missed the holding S/R level where price only almost touches resistance before reversing.

 

[Smincoo]

There should be more price outcomes than 5. And in fact there would be infinite number of outcomes.

To some extent, I agree with you that there should be much more.

 

[murray t turtle]

There should be more price outcomes than 5. And in fact there would be infinite number of outcomes.

%%
TRUE;
but if all i look@ is one trade vehicle, with no dividends most maybe bad...................................................................
I never belieVed in the free lunch, even though MOM made me some as a kid/LOL, But we had to work a round the home, so even that is debatable.,
Its also either a profit or loss;
but as they say/ diversification is the only free lunch\ on Wall Street[figure of speech\but helpful, mostly.]

 

[JSOP]

I never belieVed in the free lunch, even though MOM made me some as a kid/LOL, But we had to work a round the home, so even that is debatable.,

Not sure how much your work around the house as a kid worths when your mom still had to pick up after you and rework some of the work you've done. LOL So you pretty much got a free lunch.

 

[hilmy83]

This is a simple beginners mistake. You only account for probability of success but not for outcome when losing vs outcome when winning. You confuse W/L ratio with profit factor.

Market is random when it comes to where it goes but it's not random when you find trades where your risk is 80cts on the dollar. Finding these pockets is where the money is.

I would not touch a system with a daily sharpe below 3 with a 10 foot pole

you telling me you wouldn't touch this strategy? i want to make sure you're not blowing smoke with that post or are you being serious?

 

[MrMuppet]

you telling me you wouldn't touch this strategy? i want to make sure you're not blowing smoke with that post or are you being serious?

View attachment 268960

No, would not touch it. You only had a profit factor of 2.2 and a max drawdown of 24% (!). Long BTC outright had more sharpe than your strategy (2.8)