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Value of Backtesting and Stops
- Thread starter bluedemon77
- Start date
It would be nice if you folks would think a little more before you post....
Backtesting works IF you know how to structure the backtest, and if you have the skills to evaluate the results...Problem is most of you (I would estimate more than 90%) do not have the skill set....hence the problem.....
Arriving at the proper stoploss and catastrophic stop placement is the most overlooked aspect of intraday and swing trading...Again most your just don't have the game....
Most of what you need to know. Most of what you don't know is in a little book titled "Mathematics of Technical Analysis" by Clifford Sherry. It is about as simple as you could ask, and yet I will bet that this crowd cannot get through it.....That tells you something...
What it tells me is that most of you are currently throwing money into a pit....
Sorry
Steve
Backtesting works IF you know how to structure the backtest, and if you have the skills to evaluate the results...Problem is most of you (I would estimate more than 90%) do not have the skill set....hence the problem.....
Arriving at the proper stoploss and catastrophic stop placement is the most overlooked aspect of intraday and swing trading...Again most your just don't have the game....
Most of what you need to know. Most of what you don't know is in a little book titled "Mathematics of Technical Analysis" by Clifford Sherry. It is about as simple as you could ask, and yet I will bet that this crowd cannot get through it.....That tells you something...
What it tells me is that most of you are currently throwing money into a pit....
Sorry
Steve
When was there any doubt that the luckiest SOB with the least regard for his own skin won these trading contests?Quote from schoops:
There's a guy in my country( France ) who made like 3000 % in a trading contest ( real money ) in 3 months or whatever... He is becoming a huge trading star, wrote a book ( real dumb shit )... This guy is a mess . Not only he uses semi fundamental discretionary garbage, but he is driving any french newbie in his direction.
Leap of Faith? - How much you've attained (so far) vs backtesting profits?"
http://www.elitetrader.com/vb/showthread.php?s=&threadid=79206
http://www.elitetrader.com/vb/showthread.php?s=&threadid=79206
What software you get, bro?Quote from CaptainObvious:
Up until this past weekend I thought backtesting was a fools paradise and stated so. That was before I purchased some software with backtesting capability just this past week. I have found Jesus! Well, that could be overstating it a bit. I don't know that it's the holy grail but I sure as hell know there was no way I was ever going to make any money day trading using the "system" I had been using. Back testing made that painfully clear, as if my account didn't.
Ad far as stops....never use them for swing trading equties and that's never hurt me. I swing trade just fine. It's trying to learn to day trade that's kicking my ass. Stops too tight I lose. Stops too loose I lose more. Yeah! I know, stick to swing trading. Guess I'm just a hard headed S.O.B.
About 75% of my long-term positions are naked (i.e., w/o stops inplace). Working w/o stops is risky, no doubt about it, but w/ proper planning and strategies it's more than doable. Also takes a lot of balls (sic), esp. since we're all raised (atleast I was) that stops are crucial and you'll go broke w/o them (on shorter term trading I'd agree, but sice I do longer-term that point is moot).
I tend to average ~2%/mth, avg sharpe of ~2.8, volatility of ~1.2% across the last 10yrs (worst return was 2002 at 9.5% w/ sharpe of 0.5, best return of 62% in 2003 w/ sharpe of 4.5)........this is on ~180M and not a constantly traded portfolio
I tend to average ~2%/mth, avg sharpe of ~2.8, volatility of ~1.2% across the last 10yrs (worst return was 2002 at 9.5% w/ sharpe of 0.5, best return of 62% in 2003 w/ sharpe of 4.5)........this is on ~180M and not a constantly traded portfolio
Quote from 99atlantic:
About 75% of my long-term positions are naked (i.e., w/o stops inplace). Working w/o stops is risky, no doubt about it, but w/ proper planning and strategies it's more than doable. Also takes a lot of balls (sic), esp. since we're all raised (atleast I was) that stops are crucial and you'll go broke w/o them (on shorter term trading I'd agree, but sice I do longer-term that point is moot).
I tend to average ~2%/mth, avg sharpe of ~2.8, volatility of ~1.2% across the last 10yrs (worst return was 2002 at 9.5% w/ sharpe of 0.5, best return of 62% in 2003 w/ sharpe of 4.5)........this is on ~180M and not a constantly traded portfolio
worst system drawdown??please
Quote from taowave:
Can someone from the purely discretionairy camp who does ZERO backtesting please tell me what it is they do or look at before putting on a trade???
I am a derivatives trader who only looks at backtests to get the distribution of prices,MAE and MFE.Not concerned with anything past that
I would love to be enlightened...This is a very interesting debate
I don't do any backtesting in the manner that you mean it. Not that I don't see the value for some. I'm not a "system" trader in the manner that you mean it either.
I've described the manner of my trading here before, so I'm not going to go back through that. But let's leave it at this....when I make a trade, I make it for some type of reason. The reason could be technical, although I rarely ever act on technical aspects alone. I want something else there...some type of catalyst. It could be news, it could be ignoring some type of news that it should not have ignored. The could be some type of fundamental reason, or there could be a move starting to take place in an important market sector that would have a big impact on the general market (I trade the ES).
Once there is a reason, I'll try to stick with the trade until the reason fails to work, or something else occurs that compels me to look at something besides that particular reason. At that point I get out. If I put the trade on for a reason, and it does not move, I get out. When I expect something that doesn't materialize in a reasonable period, I get out. In fact these days, at the low commissions that are available to all traders, it's hard to imagine a reason not to terminate a position that is doing otherwise than what you expected.
I trade with a stop. Not a stop based on technicals. Simply a stop that is the maximum I'm willing to lose. It's a fail-safe point. I don't actually place the stop unless we get somewhat close to the area in question. Usually my stops in the ES are 10-20 points. In other words, I take a position based on whatever my reason is, then I sit back and observe how the market trades, how it reacts. If it trades in a manner other than what I expected, I will probably get out and go back to the drawing board.
I think it is a major mistake not to have some type of stop system. I don't care how your backtesting comes out. For instance, you could have had a system that got you long just before the October 1987 Crash (or any of the other October Massacres that have taken place in my trading life). When the day arrive that the market went down 20% with you sitting there because your backtesting results had never seen a day of that type, you would have blown your account out (as some of my friends did). Believe me, I could go through "unexpected events" that have taken place in nearly every market where those without stop points have been killed. Gold and silver, bonds, etc etc. Those "unexpected" days happen when no one expects them (by definition), and then no one believes them. And when they have gone a certain "distance", people start to fade them because it always worked before, and end up getting caught in the disaster. Think about it. It makes no difference if a stop reduces your results somewhat...you can use what I use...a disaster type of stop (which you define), which allows you to survive and trade another day.
By the way, I'm not suggesting that anyone trade the way I trade. I'm a discretionary trader. I have decades of experience on which to form an opinion (not that it will necessarily be right). I'm not against "systems"...they just aren't my cup of tea. What always made sense to me was to THINK about the existing situation, and what you think may happen next.
OldTrader