Successful strategies, holy grail and backtesting

S

silent_tunes

I am not sure if this is the best forum but I will post anyway. It is okay if someone moves it to the appropriate forum.

Let's say I have a few successful trading strategies. By successful, I mean the backtesting results have been good to great ! Now I know that a lot of real traders/old timers here frown upon newbies getting excited by backtesting results.

Since nobody can predict the future successfully with any consistency, the past is all we have in expecting/predicting how the future will turn out.

Also, my strategies require low commissions, better trading speed, good executions/fills (in other words, a retail account trading online is not optimal). The backtesting has been done to account for real world glitches (position sizing so as not to move markets, risk management, stop losses etc.)

My question is whether there are firms out there that will let me trade my strategies real time (maybe with paper money to begin with) and if my trading results are profitable, they will let me come on board to trade real money.

If you are asking why I don't use my own money to trade my strategies, read a couple of paragraphs above (I am retail and the results would be vastly better with better EXECUTION).

I saw other posts with Patak, Pulsar etc. by Google searches ended up revealing that they are not legit.

I am only 31 with full time trading experience of less than 2 years so walking into a prop firm and asking for trading previleges is out of the question.

To phrase the question clearly, are there firms out there that will take me on board with good backtesting results instead of actual trading results or an MBA in finance?
 
No sir, my backtesting is most definitely NOT of the type "If I had bought GOOG in 1998" or "If I had bought MSFT in 1982" etc...

I can prove that you pick any random stock from the S&P 500 and my strategy is simple enough that it will work on that stock. In fact, the criteria for my strategy is any dumb investor (starting with me) can win using a simple strategy.

I am not going to compete and win against the behemoths with their information networks, databases, number crunching supercomputers, tried & tested TA tools etc.

My strategy is based on simple statistical probability.

As I said before, I am sure most of you frown on backtesting results; but still it would be better if you can answer my original question.
 
Quote from silent_tunes:

I am not sure if this is the best forum but I will post anyway. It is okay if someone moves it to the appropriate forum.

Let's say I have a few successful trading strategies. By successful, I mean the backtesting results have been good to great ! Now I know that a lot of real traders/old timers here frown upon newbies getting excited by backtesting results.

Since nobody can predict the future successfully with any consistency, the past is all we have in expecting/predicting how the future will turn out.

Also, my strategies require low commissions, better trading speed, good executions/fills (in other words, a retail account trading online is not optimal). The backtesting has been done to account for real world glitches (position sizing so as not to move markets, risk management, stop losses etc.)

My question is whether there are firms out there that will let me trade my strategies real time (maybe with paper money to begin with) and if my trading results are profitable, they will let me come on board to trade real money.

If you are asking why I don't use my own money to trade my strategies, read a couple of paragraphs above (I am retail and the results would be vastly better with better EXECUTION).

I saw other posts with Patak, Pulsar etc. by Google searches ended up revealing that they are not legit.

I am only 31 with full time trading experience of less than 2 years so walking into a prop firm and asking for trading previleges is out of the question.

To phrase the question clearly, are there firms out there that will take me on board with good backtesting results instead of actual trading results or an MBA in finance?
More...

What's the trade frequency?
What is your data quality?
What is the amount of slippage/commissions that your strategy can tolerate before negative expectancy?

Ninna
 
Quote from nLepwa:

What's the trade frequency?

1. I have a few strategies; one of them is a daily strategy (one entry and one exit per day); others are weekly (one entry and one exit per week). I have strategies for equities, ETFs, options on ETFs etc.

What is your data quality?

2. I currently use historical data from Yahoo, Google as well as TDAmeritrade to backtest. I will admit that the quality of backtesting is only as good as the data being used.

What is the amount of slippage/commissions that your strategy can tolerate before negative expectancy?

3. For some strategies where speed/execution is important, slippage and commissions are critical; that is why I said that being a retail guy it was difficult to implement them successfully. However, colocation/lower commissions/good data feeds will greatly enhance the success. I have assumed a 0.1% commission and 0.1% slippage factor in my backtesting. Higher comissions and slippage will reduce the expected profit, not totally make this a losing strategy. In other words, better the commission better the profit; worse the commission worse the profit but still a profit not a loss. My other strategies are sufficiently long term (weekly) and have a larger cushion that slippage/commissions don't matter that much.

Ninna
More...
 
Quote from silent_tunes:

More...

Alright, then start trading with a retail broker (IB is good).

You need to get the ball rolling. Nobody (except friends&family) will fund you on backtesting results alone.

Proove that your strategy works for a few months and then you stand a chance to get funding and better execution.

Ninna
 
Right. Backtesting not good enough for anything. You can backtest a system and put some extra variables and get anything you want. 10%/day if you like. Backtesting can be illusion.
 
Some thoughts...

I am suspicious of any system developed with backtesting that can only succeed with execution timing unavailable with retail platforms. Especially your weekly system.

I'm a retired engineer so tweaking a system is in my DNA. None-the-less, I put every system through four stages. Bakctesting with out of sample historical data to avoid "curve fitting", paper trading, live trading with modest funds and finally full production. It's a lot of work, but I pay my current expenses with trading so I must be careful.

Familiarize yourself with one or both of the following books.
Design, Testing, and Optimization of Trading Systems by Robert Pardo

Trading Systems and Methods by Perry J. Kaufman
 
Amateur backtesting results are illusory, as here, but nevertheless they are a favorite diversion at ET. The data input, being skeletal, is of course insufficient and so correspondingly the results are always deficient or invalid. The usual fantasies of success or riches are entertained on such results.

Instead it requires a problem solving aptitude to work out the puzzle of the markets and to construct or adopt a reliable methodology to take gains sequentially out of all the swings that make up the daily gyrations of a market, open to close (eg CL).
:)
 
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