The CL/NQ experiment
- Thread starter Gabe2004
- Start date
I agree that most people don't know how to backtest, but I find this difficult to understand. I've posted detailed instructions on backtesting several times. ND has posted instructions that are even more detailed than mine. Much more detailed. And of course there is Google. Yet people still say they don't know how to backtest.
To begin with, backtesting need not have anything whatsoever to do with programming, particularly if one is interested in trading price (and by "trading price" I mean trading price alone, without indicators or patterns). It does rather have to with observing, then hypothesizing, then testing those hypotheses, back, forward, and in real time. This is time-consuming. It may even be boring. But it is an absolutely essential precondition to making money in the markets. If it weren't, then all these people who trade through the day by guessing would be raking it in.
I've also posted a detailed trading plan with a winrate of 80% and a P:L ratio that most people would kill for which traders are welcome to examine, though if they want to make it work for themselves they will have to do the necessary work to modify it to suit their individual circumstances. One cannot trade profitably without confidence, and whatever confidence one might have in something that isn't his will likely be misplaced.
We spoke years ago once or twice but I don't think it was during a trade and I don't remember the content of the conversation but I may be having a senior's moment.
Nevertheless I appreciate all the effort you are putting into these answers.
You are much more eloquent than me and you have a way of thinking that is somewhat different than my and I don't think I can replicate your way of thinking.
I can only try and adapt.
Maybe the fact that you are more analytical will explain how you can avoid the pitfalls of manual back-testing.
People said that I should chose Law but I was stubborn and I chose engineering.
Maybe that will explain most of my actions.
Gabe
From reading your story here Gabe it would seem that you and I are in similarly situated boats. We both have been at this for quite some time, apparently. In my case, it has been nearly nine years since I started "trading." I use the quotation marks, because in all those years, I never tried to establish a trading plan. I simply traded anything and everything - stocks, options, futures, forex - heck, I was a regular interactive brokers commercial 
But I had no plan at all.
Youâve been at this journal since November 21, just over two months now. The subject of a trading plan was brought up to you by niko in the second post to this journal, and your response was as follows:
If I may say (and I really do mean this in a helpful way, so please consider it such) what rules you have you seem not to follow. Why do you think that is?
And also, a question: What steps, if any, have you taken to develop what might become for you a consistently profitable trading plan? Or, do you believe that developing such a plan is not necessary to your future success as a trader?
But I had no plan at all. Youâve been at this journal since November 21, just over two months now. The subject of a trading plan was brought up to you by niko in the second post to this journal, and your response was as follows:
If I may say (and I really do mean this in a helpful way, so please consider it such) what rules you have you seem not to follow. Why do you think that is?
And also, a question: What steps, if any, have you taken to develop what might become for you a consistently profitable trading plan? Or, do you believe that developing such a plan is not necessary to your future success as a trader?
What is the difference between a TRADING PLAN and a Method?
I was always under the impression that a trading plan describes the method.
That is a question that I haven't found the answer to yet.
I said it before and so far this is my best explanation, that in trading and in trading alone, my desire to be right is stronger than my logic.
I have started this journal not exactly knowing what I wanted out of it.
I later decided that probably what I want out of it is a place that will force me to put that desire to be right, behind me.
The desire to be right is an EGO thing but then so is posting only winners and closing threads when a poster loses his shirt and he/she are very embarrassed.
Obviously the embarrassment is not something I care about too much, otherwise I would have stopped posting long ago.
I keep posting because there are people around who want to help and in the Dog Eats Dog world that we live in, this is very refreshing.
Gabe
I noticed that on days that I have large losses it starts with me moving a stop slightly because I see a BETTER defendable price level.
When that does not work I feel that since I broke the rule of not moving stops, everything else is game.
If you need more clarification please ask.
A plan is always necessary.
It would not cross my mind to do something in other fields I am involved in without a plan.
I may have what counts as a plan but since it is a set of rules in bullet form, most people will not consider it to be a plan.
I believe that most people think of a plan as a long winded literary work.
I prefer a short form.
Not unlike a flow chart in computer code.
If-Then-Next type of thing without fluff.
Gabe
Watch the Mark Douglas video each evening for 10 days. Be sure to finish all the medicine even if you feel better after a couple days.
The idea behind doing back-testing using a computer is to remove the subjectivity of us humans.
I am willing to bet that a trader who is doing manual back-testing will have different results for the same data every time he/she will run a back-test. (Maybe not NoDoji because of her very detailed plan)
With all due respect a high W/L ratio is not a guaranty for a profitable outcome.
A positive expectancy is the key ( this is the formula for Expectancy. E=W%*W$-L%*L$)
Many successful traders have a W/L ratio of less than 50%.
Apparently there is more room for error with a low W/L ratio system.
Take Nassim Taleb or Peter Brandt to name just 2 who made/make $$$ with systems that have lower than 50% W/L ratios.
http://peterlbrandt.com/the-myth-of-a-7030-win-loss-ratio/
I am not saying that high W/L ratios cannot be profitable.
All I am saying is that there are other possibilities and just stating a high W/L ratio does not present the full picture.
Gabe
Yes Dr.Watch the Mark Douglas video each evening for 10 days. Be sure to finish all the medicine even if you feel better after a couple days.
I promise I will.
Good night.
Gabe