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Yep! That palaver would probably appeal to the Novice Landlubber!
Well Done!

It is not until you go to sea that you can appreciate the seamanship skills of Hoisting the Correct sail classification but also the Size of that sail

For Example
If you thought FGM and MGX were a good BUY as they are
Would you buy $100,000 FMG
or $100,00 MGX

What I am saying here is that a Sail say XYZ is not always weighted the same as another sail say ABC

How do you handle the conundrum of the heavyweight and the Lightweight Sails

I am also lost in finding anywhere on Earth that is the same Today as it was Yesterday!

So how can any Back-testing be relevant in studying say the Last 4 Weeks?

Do you rate the weights of each sail
Or are your heavy-weight sails the same as your middle weighted sails ETC ETC

As you can see in any Ship Design fully presented to the WIND

Not all the sails you hoist are always equally weighted as in the Olden Day Tall Ships
Some are much larger than others
and Some storm sails are very small

Are all your sails Equally Weighted?

 

Huh?

skate.
 
"So how can any Back-testing be relevant in studying say the Last 4 Weeks?"

The very same way sailors know that trade winds will blow at a certain time and certain direction. Say it's a late afternoon summer day in Perth, and you're out at sea playing pirates in your minnow, will you make it back to shore? Yes, the Freemantle Doctor will almost certainly land you on shore. You can bet on it.

Charts move because people are greedy and fearful. Human nature repeats just like the trade winds.
 
Skate said:
Trend trading strategies have a habit of producing large drawdowns in bearish markets. It's just a (bummer) trading in all market conditions.
Click to expand...

It's so true
Ask any trader who has traded during a bearish market & they will confirm they have suffered larger than normal drawdowns, larger than they even expected. There is plenty of reports currently on Twitter where they are posting about their drawdowns & losses.


Keeping drawdowns to manageable levels
Capital preservation is the key to the longevity of a trader. I believe every statement I make is true but at times not to others as they hold an alternative view. That's why I always encourage others to express alternative views.

I would also like to make these statements
(1) "We all see the world through our eyes" &
(2) "Our perception forms our reality".

What's annoying with trend trading (IMHO)
It's more of an irritation than annoying as no matter what I do (code-wise) it usually ends in (a) greater returns or (b) lower drawdowns & at times I achieve both "at the same time" but the ultimate strike rate never changes to any degree.

Skate.
 
Understanding drawdowns
lets me start off with a statement "If you have a strategy that's working, keep working on it. Drawdowns make us fearful & have the ability to drive our emotions. When the market starts going down, those new to trading & knowing very little about how to preserve profits will sit there & watch their profits quickly disappear. Eventually, the pain becomes too great & sell at a substantial loss.

Little fish are sweet
Chasing high returns always goes hand-in-glove with higher risk. When chasing respectable returns it's a lot easier to handle the lower drawdowns. Trading aggressive strategies may give you eye-watering returns but it usually means large drawdowns because you can't have it both ways.

Skate.
 
How I analyse drawdowns.

MDD - The largest drawdown over a time period.
Average Drawdown = The average of all drawdown values for every day over a time period

Days in DD + % = How many days in drawdown
Days > 2.5% = How many days was the drawdown >2.5% and the percentage of days
etc.

system 1, system 2, system 3, system 4 are individual systems
system 1234, system 1,3 and system 1,4 are averaged from the equity tables of the individual systems.

Note how the drawdown halves when the right systems are merged.

Also system 2 has better drawdown figures ( to me ) than system 3 even though it's MDD is worse

 
DaveDaGr8 said:
Note how the drawdown halves when the right systems are merged.
Click to expand...

@DaveDaGr8 what an excellent post
Posts such as these give practical examples of how one should go about managing drawdowns in the "development phase". Your methodology, with those calculations (at first glance) seems a perfect way to evaluate any new strategy ensuring the drawdown is within your own risk tolerance, a level you can handle.

How do we achieve a low drawdown?
The first place to concentrate on is getting the exit strategy just right which is not easy but possible. In saying this "exits" need to fit your personality more than entries. What I mean by that is too many people look at what makes the most money & then they can't trade it because of the drawdowns, trade frequency, or other problems that cause them emotional angst. One of the first steps to becoming a good trader is to understand that you can't perfect everything, so don't even try. Strategy improvements come over time.

Preventive action is for self-preservation
I'm just saying, concentrating on the drawdowns metric ensures the risk is acceptable & manageable. Assuming you have a profitable strategy, one with a distinct edge, there are ways you keep drawdown under control. Honing your exit strategy is the first step & the next should be proper position sizing. Large drawdowns are often a side effect of traders losing control of their emotions intelligent.

Skate.
 
Posting to excess
@DaveDaGr8, sometimes I'll read an article on the internet or a Twitter post & think to myself, that would make an interesting post for someone just starting out on their trading journey. The difficulty for me is knowing when to stop. Members get exhausted reading a series of posts, one after the other, so I try to keep them to a minimum these days, which is hard for me.

Drawdowns - this beast needs to be controlled
As @martyjames broached the subject of entering a strategy during a drawdown gave me the perfect segue to express my views on the subject. Explaining along the way why this metric is so important to the profitability of any strategy. Yesterday & today, allowed me to expand on a subject/metric that others pay little attention to when developing a trading strategy. Knowing the truth about how large drawdowns affect the performance of every strategy gives an understanding of why there are some traders who perform better than others.

Skate.
 
Good morning Skate,
Great days in the north, very hot and very humid with clear skies ... gotta be some Monsoonal storms coming soon.
Cool down and freshen the place up a bit. Flush the river systems out... Brings on exercise, gotta cut the grass allot more often ha ha ha ha.

Back to business:

Trading in a bear market is challenging, yes true that, but it is not as difficult to overcome, for day and to a certain degree swing traders. Stock selections are made during the actual bear market, in real time. Depends, obviously the stock can retrace further ... the selection of the stock and the actual timing to move, has been discussed previously. Suggest in 'bad times' signals are required to be clearer and more compelling. Higher threshold of 'common sense', if there is something around like it...

rcw1 can certainly comment though, for mine, when an evidence base selection pendulum for stocks to trade is swinging towards a bare minimum, rcw1 will increase the amount of spend on stock selected. Why? Never let an opportunity pass a trader by... where there is an opportunity, when circumstances arise where opportunities are limited, embrace it, target it and go for it.
Be perfect.

Hoping this makes some sense.
Anyways, back into the sandpit.

Have a very nice day, today, Skate.

Kind regards
rcw1
 

DaveDaGr8 said:
How I analyse drawdowns.
Click to expand...

@rcw1 I don't believe you or @DaveDaGr8 realise the importance you guys have made today passing on snippets in your respective posts. In my opinion, both posts hold information that is pure gold. Thank you.

Skate.
 
Like it....

"rcw1 can certainly comment though, for mine, when an evidence base selection pendulum for stocks to trade is swinging towards a bare minimum, rcw1 will increase the amount of spend on stock selected. Why? Never let an opportunity pass a trader by... where there is an opportunity, when circumstances arise where opportunities are limited, embrace it, target it and go for it.
Be perfect".

? Easy money if you have the time to keep watchful eyes...done it a few times...comments I received from others when sharing the trick...you are playing with fire or you are gambling..I simply smile..Day Trading...
 
Skate said:
I've asked Nick twice if he would be kind enough to fill in the backtest for his WTT Strategy, not only for myself to compare & contrast but for others who read this thread. Silence is never a good look.
Click to expand...

Nick Radge said:
The staff member responsible for updating that data has been extremely busy on other projects. He'll update at month end.
Click to expand...

Be careful what you wish for
@Nick Radge, thank you for having the "WTT Strategy" backtest results updated. Comparing the before & after results have now opened another "can of worms" because the updated results have been completely repainted making the point of the exercise less than useless.

If you are going to post results
Let's make a backtest accurate, constant, believable & achievable. I've made a series of posts explaining the importance of conducting a backtest correctly so they are accurate & repeatable. I even go into great detail about how this is achieved. If you do a backtest the correct way the results will be more believable & in my opinion achievable.

Compare the pair
Frankly, I'm shaking my head. When backtest results are posted they need to be believable & achievable.



In summary
I suggest you read "The Chartist" Disclaimer in relation to the results posted above.

Disclaimer
NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

Skate.
 
Gringotts Bank said:
I have no idea what a repainted backtest is.
Click to expand...

@qldfrog explanation is simple & concise
@Gringotts Bank, I'll use a screen capture so you have a better understanding using the ZigZag reference. Repainting means with every push of the backtest button the information constantly keeps changing. It's a rookie mistake & it can be eliminated. I've made a ton of posts on this very subject, a simple search will find them all.

Compare the pair
The original backtest before the update is the top line of the report below. I've placed the most recent "updated" backtest report under the original so you have a direct comparison that the results have changed. Both results are from the same strategy & the returns are like chalk & cheese. If you didn't know they were the "same strategy" & you were shown two separate backtest results one being (41.98%) for the year 2000 & then shown another backtest result for the same year displaying a yearly result of (19.60%) which strategy would you be inclined to purchase?

Repainting
With each backtest "using the same code", if the results keep changing, that's repainting.

Look at this
1. Original Yearly % backtest result = 41.98%
2. The updated Yearly % backtest result drops back to = 19.60% (WTF)

If you still are unsure about the term repainting
1. Imagine each month's percentage results are on a canvas.
2. Take Feb, the original had 20.10% painted as the result
3. With another backtest run the picture was repainted to display not (20.10%) but (6.50%)

All I'm saying
If you can't trust the backtest, could you imagine trading your hard-earned dollars on that strategy as each backtest would tell you something different.



A simpler answer
Imagine if you asked someone the exact same question & each time they gave you a different answer, would you trust them, I don't think so. When you do a backtest it needs to be accurate, reliable & repeatable otherwise how could you trade on those backtest results?



Skate.
 
I'm familiar with repainting indicators, having been through the zigzag drama on here. By the way Nick DM'd me and said my zigzag code was fine and that it didn't have a future leak.

Regarding 'repainting backtest', how could that possibly happen? I know PositionScore = Random() will do that, but when else? Are you suggesting he actually changed the code?
 
Gringotts Bank said:
.

Regarding 'repainting backtest', how could that possibly happen? I know PositionScore = Random() will do that, but when else? Are you suggesting he actually changed the code?
Click to expand...
That's a good point.even a future leaking code will usually have limited effect on past results..As i can understand it..i am no guru .if i run 2 backtests along time, have a deterministic Position score, and get 2 different results, i have either changed data feed, realm or code especially for 2000 run as not many codes will look at 2022 realtime market data to take decision 22y earlier.
This would not be future leaking but crystal ball coding?.
I am no expert but i would say something has changed.
I finetune my systems regularily and keep code versions.my code is alive..after all, aim is making money not checking how hurtful are errors of the past
Version management is an art and this is probably where Nick result failed..or just human error in data processing.i am not the one to throw the stone after losing 12% last week on a trade due to input typing error?
 
And BTW, good on @Skate for spotting the discrepancy ?.
Issues can not be fixed if undetected.
 

Skate said:
I've made a ton of posts on this very subject, a simple search will find them all.
Click to expand...



Read this, it's important
"Position sizing
defines position sizing method used by MC simulator in "trade list" mode:

Don't change - uses original position size as used during backtest. Keep in mind that it always uses original dollar value of the trade (or whatever currency you use), even if your formula is using percent of portfolio equity.

Fixed size - uses fixed number of shares/contracts per trade

Constant value - uses fixed dollar amount for opening any trade

Percent of equity - uses defined percent of current simulated equity value. Be careful when using this setting - it causes that position size of one trade depends on profits on previous trades (compounding profits) and creates serial dependence. It may also lead to extra compounding effect when you have overlapping trades in your original backtest as bootstrap performs trades sequentially (so they don't overlap). For this reason its use is limited to cases when no overlapping trades occur".

Skate.
 
Last edited:
Guessing results provided are from a monte carlo backtest.

Edit: both of them and suppose no two customers will have the same results so maybe why.
 
Last edited:
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