When I enter a trade, I know the price at which I set my stop and the price at which I can first move that stop. I was thinking that in order to never take the maximum loss on a trade, I would run the numbers to see if entering at the price at which I could first move my stop, rather than the price dictated by the strategy logic, would end up with better results. But, in fact, just the opposite occurred and the numbers, even with the trades which took the maximum loss removed, since I would have never entered them, were worse. So, I started to wonder if the implication of this is that my entry prices are, in fact, not random, but tuned into something that is essential to the markets themselves. Since my entire strategy is basically premised on that hypothesis, it would be nice if there were some way to "prove" it and this seems to do so.
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"Proving" entries are better than random
- Thread starter logic_man
- Start date
It's easy enough to test. Use random entry points (in terms of both price and time), but identical money management, risk, exits, etc.
Run, compare.
Run, compare.
There are many statistical tests for doing that. Search under randomness tests or hypothesis testing.
But in the case of trading systems the best way of doing that is a forward or out of sample test. You can have a system that does worse than a random one. In that case it is worthless. A monkey could do better that is.
But in the case of trading systems the best way of doing that is a forward or out of sample test. You can have a system that does worse than a random one. In that case it is worthless. A monkey could do better that is.
Quote from intradaybill:
There are many statistical tests for doing that. Search under randomness tests or hypothesis testing.
But in the case of trading systems the best way of doing that is a forward or out of sample test. You can have a system that does worse than a random one. In that case it is worthless. A monkey could do better that is.
+1
Monkeys are the best traders. always were........
all the answers are in statistics.
You can never make enough statistics.
Make, create, compare = solution = make, create Rules = Trade Them........