My Automated Trading Strategy (3Years+ of Historical Data) Please Critique!

[Stok]

You need to BT for 30 years, not 3 years. Trust me; and you need to add a volatility measure in your system. Example is this....let's talk the SP(ES): ATR in 1998-2002 was 30-20 points. Then ATR went down as low as 5 in 2003-2005. Then got back to over 40+ during the financial crisis. These are daily 100MA of ATR.

Point is this: When markets move and you need to design a system around that....go look at what your system did during low volatility times.

CL, GC, SI have been crazy in the last 3-4 years. Systems look good...but what did they look like in the 80's? Because if it sucked, it never would of have been posted here. Think about it.

One word of advice: Add an ATR measure to adjust to volatility on your system. And, risk 1-2% per trade max.

 

[jedwards]

Quote from julian0625:

I am using Ninja trader 7 for all backtesting.

All trades are executed on the open of the bar AFTER the trigger bar, and all trades are made on a 10 minute bar chart, nothing else.

In the event where we have a bar that goes against me 150 ticks, and is the entry bar, nothing will have changed.

Ex. Trigger bar is long, next bar opens at 109.00. I am filled at 109.00 long, and immediatly my stop order is place at 107.50. 5 minutes after the entry, oil drops to 107.50 and I am out. Nothing should change wether I am 10 min or 1 hour after the entry.

Once a stop loss is hit and the system is flat, the strategy just waits for a new signal, long or short, and continues on.

I see, so you wait until the next bar to get in or out.

Okay, final question: who do you use are your data provider? IQ Feed, or someone else? If you are using IQ Feed and backtesting using the continuous contract, I would verify that the contract that IQFeed is using is the same one that has the most volume. I know for a fact that IQ Feed's grains do not rollover properly.

And just some things to watch out for:

1) Make sure your computer clock is synchronized to a time source. My computer clock drifts wildly every day so every morning as I start trading I make sure to sync my clock. You should be syncing at least once a day to an ntp provider, probably twice a day just to be safe. Otherwise, I believe NT's candles will be off because I believe they use system time to start a new candle, which would affect your trades.

2) Make sure you rollover to the next contract properly. I don't trade CL so I'm not sure which months are the popular contracts, but from what I remember, the rules for the most popular contract are different than the indexes like ES or TF. You don't want to be trading an expiring contract, etc.

Good luck tomorrow with your simtrading, and keep us posted as to how it works out!

 

[julian0625]

Quote from Stok:

You need to BT for 30 years, not 3 years. Trust me; and you need to add a volatility measure in your system. Example is this....let's talk the SP(ES): ATR in 1998-2002 was 30-20 points. Then ATR went down as low as 5 in 2003-2005. Then got back to over 40+ during the financial crisis. These are daily 100MA of ATR.

Point is this: When markets move and you need to design a system around that....go look at what your system did during low volatility times.

CL, GC, SI have been crazy in the last 3-4 years. Systems look good...but what did they look like in the 80's? Because if it sucked, it never would of have been posted here. Think about it.

One word of advice: Add an ATR measure to adjust to volatility on your system. And, risk 1-2% per trade max.

My strategy accomodates for both high and low volatility times, as it does not have route price targets. So whether the range is 50 ticks or 500 ticks, the strategy is just trying to get whatever it can out of it.

I have not been able to back test much further past 07 as the electronic oil contract is relatively new. My strategy would've had to completely change with a pit contract, so going past 5 years is out of the question.

I agree with your point about having strategies for specific market times. The strategy I have created is a mean reversion strategy that works best with instruments that have large ranges (allowing for more pricing inefficiencies). So I am going to follow your advice and trade the current trend in oil (atr's of 200tick plus) until it runs out.

If oil does become dormant again, I will definitely re evalute my strategy, but it does not look like that is going to be happening any time soon.

Thanks for the advice!

 

[julian0625]

Quote from jedwards:

I see, so you wait until the next bar to get in or out.

Okay, final question: who do you use are your data provider? IQ Feed, or someone else? If you are using IQ Feed and backtesting using the continuous contract, I would verify that the contract that IQFeed is using is the same one that has the most volume. I know for a fact that IQ Feed's grains do not rollover properly.

And just some things to watch out for:

1) Make sure your computer clock is synchronized to a time source. My computer clock drifts wildly every day so every morning as I start trading I make sure to sync my clock. You should be syncing at least once a day to an ntp provider, probably twice a day just to be safe. Otherwise, I believe NT's candles will be off because I believe they use system time to start a new candle, which would affect your trades.

2) Make sure you rollover to the next contract properly. I don't trade CL so I'm not sure which months are the popular contracts, but from what I remember, the rules for the most popular contract are different than the indexes like ES or TF. You don't want to be trading an expiring contract, etc.

Good luck tomorrow with your simtrading, and keep us posted as to how it works out!

My data provider is CQG, which is pretty reliable, and it only back tests the active contract.

1)Yea I noticed that! Every day my computer clock is 3, 4 seconds behind and I have to always reset it.

2)Yes definitely. Dont want to be sending a market order in a contract with a 10 tick spread .

Thanks for the best wishes!

 

[traderslair]

As said before and reading all your answers your strategy is not profitable because on those markets you can put a limit order on 1200.00 and the price will be 1200.00 and for minutes long you will not get a fill, you will only get a fill if you pass that price level higher/lower.

You will just get no fills. Period.

Ninjatrader is also the worse program to do backtesting. In their database they have wrong bid/ask historical data stored. Their database is not designed correctly to hold them right.

 

[julian0625]

Quote from traderslair:

As said before and reading all your answers your strategy is not profitable because on those markets you can put a limit order on 1200.00 and the price will be 1200.00 and for minutes long you will not get a fill, you will only get a fill if you pass that price level higher/lower.

You will just get no fills. Period.

Ninjatrader is also the worse program to do backtesting. In their database they have wrong bid/ask historical data stored. Their database is not designed correctly to hold them right.

As I mentioned before, my average trade profit is $150, so I can use market orders and still have my edge.

Also I am trading oil... look at the range on it. I have yet to find a trade that did not go against me less than 5 ticks. Yet just to be safe, I will be using market orders.

 

[d08]

3 years of a single futures contract is not enough, if this was a basket of futures or all stocks it would be more informative but still wouldn't give a definite answer if it works or not. Oil has been very volatile during the period you tested, lots of action in both directions, historically it has had very calm periods and you have optimized your rules for the very volatile period - you will be whipsawed into a large drawdown.

 

[pwrtrdr]

Quote from d08:

3 years of a single futures contract is not enough, if this was a basket of futures or all stocks it would be more informative but still wouldn't give a definite answer if it works or not. Oil has been very volatile during the period you tested, lots of action in both directions, historically it has had very calm periods and you have optimized your rules for the very volatile period - you will be whipsawed into a large drawdown.

So, begin looking at a volatility filter such as ATR measure. No ?

If he is using market orders he should be good.

 

[julian0625]

Quote from d08:

3 years of a single futures contract is not enough, if this was a basket of futures or all stocks it would be more informative but still wouldn't give a definite answer if it works or not. Oil has been very volatile during the period you tested, lots of action in both directions, historically it has had very calm periods and you have optimized your rules for the very volatile period - you will be whipsawed into a large drawdown.

Yes, the only problem is the electronic oil contract has only really been active since 07, and no matter what, my strategy could not work with a pit contract.

IMO I don't think oil will be calming down anytime soon. For it to go back to ranges seen 10 years ago, it would need to trade in the $10-$50 range, which I don't think we will see in the near future.

Nonetheless, anything is possible, so I might as well ride this current edge till the well is all dry.

Thanks for the suggestion! I will still see if I could get more data.

 

[traderslair]

Market orders on CL ?

Hahahahahaha


wait a minute


HAHAHAHAHAHAHAHAHAHA

And you backtested that with ninjatrader ???

You will be happy if you will just do BE.