When evaluating your trading results, is it proper to compare to a simple buy and hold?

[lindq]

My question is, am I correct in my way of thinking when evaluating trading results?
Why or why not?

First, appreciate that it's very unlikely you will ever develop a trading system that excels in all market environments. There is no "one thing fits all."

So your objective should be to define what works...why it works...and when it works. Then build your systems around that. If your testing shows that a strategy gains or loses during certain timeframes, then dig into that. You may end up with ten different strategies built around ten different instruments, based on overall market dynamics.

It takes time. A LOT of time. But eventually your experience should help you understand the market dynamics that favor one strategy over another, and can help you to out perform.

 

[Sekiyo]

First, appreciate that it's very unlikely you will ever develop a trading system that excels in all market environments. There is no "one thing fits all."

So your objective should be to define what works...why it works...and when it works. Then build your systems around that.

It takes time. A LOT of time. But eventually your experience should help you understand the market dynamics that favor one strategy over another, and can help you to out perform.

An all weather portfolio is built with complementary strategies.
Some mean reversion, some momentum …

I don’t have multiple and complementary strategies,
Therefore it better works under every conditions xD

 

[PPC]

20 trade samples seems like a way too small sample size to get a true sample of if the pattern truly has an edge though, no?

Re my post #9: The by post @Axon is not deleted, I apologize for overlooking it, nevertheless I stick with what I wrote about the nonsense they were telling you. You as a beginner, stay away from leverage, and stay away from intraday trading, don't listen to them.

Now to your question. Yes, 20 trades is way too small if you’d plan to trade it, that’s why I wrote if that (20 sample) would seem to work, then you’d need to do far more thorough research.

However, 20 sample size is enough to see if the pattern has some edge, provided it’s based on sound market logic (if it would be based on algo, then no). If yes, then you can continue to do further research.

On a side note, for example, when I do backtests for FX (intraday trading), I’ll manually backtest (bar replay) 6-12 month across a diverse range of pairs and timeframes, and so I’ll have hundreds of trades in the test. This way you accumulate tons of examples of good and bad, won and lost setups across various pairs, plus you also start developing feel for the market.

You can do similar things with EOD (End Of Day) data with stocks, but it would be prudent to have some personal definition of the market type.

This might be all bit overwhelming for a beginner especially if one is telling you do this, and other person is telling you to do the opposite.

For a time being I suggest not to listen to those posters who were suggesting leverage and/or day trading. In the future once you're profitable, then you can reassess.

 

[murray t turtle]

Hey all,

I am not an experienced trader, however, whenever I am looking to do some backtesting or evaluating results, my mind automatically goes to "how would this have done compared to just buy and hold?"

I have done some simple backtests and I automatically dismiss the system because they are worse than just buy and hold on a total return basis. However, maybe I am wrong with this mindset?

My question is, am I correct in my way of thinking when evaluating trading results?

Why or why not?

Thanks!

%%
I would + do compare it to a lot more than just ''buy + hold'';
better yet/ buying a good fund or benchmark every month, for 30, 40 years.
I make sure ,too look @ more than 20 years , where even a good benchmark like SPY[S&P 500]could be 20 years + has been flat. IF some caught a 20 year flat % from get go, do better , have another income stream.
But so many[about 80%] can even beat SPY benchmark.
SO a clue/ concerning Paul Tudor Jones's farm;
or WO'N [ IBD founder] $275 million IBD sale to Dow Jones, helps a lot .
BY the way, do i or the Insurance Co, expect me, the buyer, to make a profit on buying insurance, long term ?? NO=LOL
LOL But good insurance idea anyway\ especially from a risk help plan.
Like Dave Ramsey says, a longer term goal is some forms of self insurance Good question

 

[deaddog]

How are you going to judge if you are successful.
You need some kind of benchmark to compare yourself to.
A simple buy and hold of the market using SPY will tell you if you would have been better off investing long term.
Mind you if you are trading for excitement or entertainment then it's a hobby and will probably cost you money.

Hey all,

I am not an experienced trader, however, whenever I am looking to do some backtesting or evaluating results, my mind automatically goes to "how would this have done compared to just buy and hold?"

I have done some simple backtests and I automatically dismiss the system because they are worse than just buy and hold on a total return basis. However, maybe I am wrong with this mindset?

My question is, am I correct in my way of thinking when evaluating trading results?

Why or why not?

Thanks!

 

[Tall Mike]

Re my post #9: The by post @Axon is not deleted, I apologize for overlooking it, nevertheless I stick with what I wrote about the nonsense they were telling you. You as a beginner, stay away from leverage, and stay away from intraday trading, don't listen to them.

Now to your question. Yes, 20 trades is way too small if you’d plan to trade it, that’s why I wrote if that (20 sample) would seem to work, then you’d need to do far more thorough research.

However, 20 sample size is enough to see if the pattern has some edge, provided it’s based on sound market logic (if it would be based on algo, then no). If yes, then you can continue to do further research.

On a side note, for example, when I do backtests for FX (intraday trading), I’ll manually backtest (bar replay) 6-12 month across a diverse range of pairs and timeframes, and so I’ll have hundreds of trades in the test. This way you accumulate tons of examples of good and bad, won and lost setups across various pairs, plus you also start developing feel for the market.

You can do similar things with EOD (End Of Day) data with stocks, but it would be prudent to have some personal definition of the market type.

This might be all bit overwhelming for a beginner especially if one is telling you do this, and other person is telling you to do the opposite.

For a time being I suggest not to listen to those posters who were suggesting leverage and/or day trading. In the future once you're profitable, then you can reassess.

okay, so can you give me an example of what an edge on 20 trades would look like to be good enough to further research?

 

[PPC]

okay, so can you give me an example of what an edge on 20 trades would look like to be good enough to further research?

Just being able to objectively recognize a repeating price (not indicator) pattern, i.e. recognisable price structure might be enough of an edge to warrant further research of the next stage. You need to understand that just like in casino, the edges are very small, so do not expect something jump at you at a 1rts glance, it takes work.

The devil is always in the details. Pattern recognition provides you with some objectivity/structure, and so in the next stage you can start experimenting with adding some logic rules around the potential edge based on other observable things that would specifically relate to the pattern you're taking to next stage of research.

Here is an example:

You can just start by

1. marking up your charts with basic support resistance (S/R), preferably on End Of Day (EOD) charts, and start noticing which work/fail, and why.

2. wait for a breakout, let someone else take the breakouts (it often fails)

3. then look to enter on the 1rst pullback to the S/R. Just scroll the historical charts. (Do not expect much of an edge with this, but with practice it's easily recognizable price structure you start to work with


Next stage:
Once you start recognizing this S/R (no need to have edge yet, just recognition of the pattern reoccurring), then you can start increasing the edge by adding few extra nuances suchas

1. the quality of the breakout, (important)

2. how the price returns to the S/R, (important)

3. and few other key things which I won’t mention on forum . . . and then all of the sudden what looked like a pattern without edge becomes profitable pattern by just by considering few of these other nuances around the recognisable price structure.


Next stage:
After you master those nuances on that particular timeframe then you can start

1. practicing zooming into a smaller timeframe (say 60min) to get discounted entries and to see where to put more logical and more precise stop placements. This should significantly increase your reward to risk on each trade, and the edge should finally be very noticeable, something you were not able to see during the first stage

2. noticing certain patterns on the smaller timeframe which will help you to confirm or reject the price action on the higher EOD timeframe (EOD chart still used chart for trade management)

3. few other things like that and soon you have a decent, robust edge that will outperform most computer systems.

Exits and trade management can really make or break any strategy, and you need to experiment with this as well. Just start with comparing different trade management techniques.


Will it work for you right away? Very unlikely, it needs practice just like everything else.

But it should give you and other newer traders some basic guidelines on how to develop robust edge for most liquid markets under most conditions.

 

[Axon]

Hi Mike,

ignore the replys above, they’re inexperienced traders and they replied nonsense.

Well that's an ignorant uncharitable take you prick. Especially when followed up by walls of barely coherent useless drivel.

Just being able to objectively recognize a repeating price (not indicator) pattern, i.e. recognisable price structure might be enough of an edge to warrant further research of the next stage. You need to understand that just like in casino, the edges are very small, so do not expect something jump at you at a 1rts glance, it takes work.

The devil is always in the details. Pattern recognition provides you with some objectivity/structure, and so in the next stage you can start experimenting with adding some logic rules around the potential edge based on other observable things that would specifically relate to the pattern you're taking to next stage of research.

Here is an example:

You can just start by

1. marking up your charts with basic support resistance (S/R), preferably on End Of Day (EOD) charts, and start noticing which work/fail, and why.

2. wait for a breakout, let someone else take the breakouts (it often fails)

3. then look to enter on the 1rst pullback to the S/R. Just scroll the historical charts. (Do not expect much of an edge with this, but with practice it's easily recognizable price structure you start to work with


Next stage:
Once you start recognizing this S/R (no need to have edge yet, just recognition of the pattern reoccurring), then you can start increasing the edge by adding few extra nuances suchas

1. the quality of the breakout, (important)

2. how the price returns to the S/R, (important)

3. and few other key things which I won’t mention on forum . . . and then all of the sudden what looked like a pattern without edge becomes profitable pattern by just by considering few of these other nuances around the recognisable price structure.


Next stage:
After you master those nuances on that particular timeframe then you can start

1. practicing zooming into a smaller timeframe (say 60min) to get discounted entries and to see where to put more logical and more precise stop placements. This should significantly increase your reward to risk on each trade, and the edge should finally be very noticeable, something you were not able to see during the first stage

2. noticing certain patterns on the smaller timeframe which will help you to confirm or reject the price action on the higher EOD timeframe (EOD chart still used chart for trade management)

3. few other things like that and soon you have a decent, robust edge that will outperform most computer systems.

Exits and trade management can really make or break any strategy, and you need to experiment with this as well. Just start with comparing different trade management techniques.


Will it work for you right away? Very unlikely, it needs practice just like everything else.

But it should give you and other newer traders some basic guidelines on how to develop robust edge for most liquid markets under most conditions.

A retail trader receives no statistical edge from trying anything you posted and anybody sitting in front of their computer clicking away with their mouse will get rekt trying to do this. You are a clown giving bogus advice that sounds vaguely plausible yet have likely never had a profitable month in your life other than sheer luck.

PS: the other poster deleted his reply after he saw my response. Interesting.

My first reflex is to put idiots on ignore to avoid the eye pollution but I took you off since you keep posting nonsense and, in a probably misplaced sense of fairness, so you can read and respond.

 

[Axon]

what's the point of trying to "impress" them with the nonsense with options

You further beclown yourself. Farming premium with options isn't some advanced esoteric skill. It's a basic quantitative approach, certainly less advanced and more likely to have an edge that can be exploited by retail than trying to mouse click your way to profits with TA chart doodles. There are many market regimes that are more amenable to option selling than haphazardly buying equities based on the useless strategies you've proffered. You seem to be trying to "impress" with ignorance.

You as a beginner, stay away from leverage

Nowhere in my post did I say he should jump straight to leverage. Leverage is something you can tactically apply to a portfolio that already has superior risk adjusted returns which to paraphrase is exactly what I said. Having a blanket policy to eschew leverage under any circumstances flies in the face of all understanding in the last 50 years of how risk adjusted portfolio management is done. Coming from you that doesn't surprise me though.

However, 20 sample size is enough to see if the pattern has some edge

Imagine believing this shit. Please reply quickly so I can hurry up and put you back on ignore. My finger is getting itchy.

 

[PPC]

You are a clown giving bogus advice and have likely never had a profitable a day in your life other than sheer luck.

Sorry, I just laughed at your nonsense. Am I supposed to feel insulted???

You try to present me badly, but actually, you’re doing it to yourself.