Dump it Here

Initial results
Based on the backtest results the "Dual Breakout Strategy" produced impressive returns with a good reward for the risk taken. The win rate of 38.95% is relatively low. However, this is expected for breakout strategies which cut losses quickly but let winners run. The max trade drawdown of -45% and max system drawdown of -14% seem reasonable for this type of strategy. A solid profit factor of 1.62 and a high expectancy of $411 per trade indicate good upside capture potential. The positive K-ratio shows more large winning trades than losing trades.

On the flip side
The recovery factor of 3.68 suggests the system is adaptable to varying market conditions. The Ulcer Index of 6.25 indicates moderate drawdown pain over time.

In summary
The backtest shows promising reward potential for a breakout trend-following approach. There is likely room for improvement in win rate and drawdown control with parameter tuning. Overall, the strategy exhibits positive expectancy and has demonstrated strong historical results. The use of adaptive analysis provides an edge in trend detection across changing market environments. With robust risk management, the system could produce reliable returns from capturing emerging uptrends.


Skate.

Skate said:

My current thinking of identifying emerging uptrends
The core buy logic is straightforward - buy if the closing price breaks above the prior 20-bar lowest low plus twice the 10-bar Average True Range (ATR). This aims to identify closing prices breaking out above recently established support levels, signaling the potential start of an uptrend. The ATR component adapts the support breakout trigger to evolving volatility conditions. Wider breaks are required during volatile markets, while smaller breaks suffice in calmer conditions.

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@qldfrog, I hope others duplicate the "Dual Breakout Strategy" for further evaluation. I'm impressed with the initial result (and I'm not easily impressed) and with a few moving parts the strategy should be easy to replicate for those interested,

Skate,

Skate said:

@qldfrog, I hope others duplicate the "Dual Breakout Strategy" for further evaluation. I'm impressed with the initial result (and I'm not easily impressed) and with a few moving parts the strategy should be easy to replicate for those interested,

Skate,

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Much appreciated Mr Skate, I would be keen to check it and do an implementation, but the farm is still on sale and bank accounts to survival mode: I have no cash for strategies so even my trusted reliable one is off.
We change agent in the following weeks so hopefully we will have a break, a sale, and be involved again.
Just hope that by that time, and among the mayhem, I do remember this exchange.

Sorry Capn Stakes
The Problem with Back tests is that they are not in Real Time
We have to Buy at the Sellers price

qldfrog said:

Much appreciated Mr Skate, I would be keen to check it and do an implementation, but the farm is still on sale and bank accounts to survival mode: I have no cash for strategies so even my trusted reliable one is off.
We change agent in the following weeks so hopefully we will have a break, a sale, and be involved again.
Just hope that by that time, and among the mayhem, I do remember this exchange.

Click to expand...

Have you tried growing some Turmeric in the mean time?

Captain_Chaza said:

The Problem with Back tests is that they are not in Real Time
We have to Buy at the Sellers price

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You raise an excellent point @Captain_Chaza. Backtests don't account for real-time execution at market prices. The next vital step is real-time paper trading to validate the strategy in a live environment.

With @Joe Blow's approval, I think this thread could provide a transparent case study. We could paper trade the "Dual Breakout Strategy" in real-time and log detailed results.

To be clear, this would be an educational exercise - not a signal service. The goal would be to show the process of transitioning a backtest to live trading. Tracking real-time paper trading performance could demonstrate how execution impacts results compared to simulated backtests.

The live logs could include:
(a) Entry price versus backtest price
(b) Slippage on exits
(c) Execution delays
(d) Actual fill prices

Documenting these factors will illustrate the adjustments required from backtest to live trading. Readers could learn about turning strategies into practical systems. I'm open to suggestions to make the paper trading demonstration as educational as possible. The key aim is transparency on real-world performance versus simulated results.

NB: @Joe Blow has been contacted.

Skate.

Skate said:

With @Joe Blow's approval, I think this thread could provide a transparent case study. We could paper trade the "Dual Breakout Strategy" in real-time and log detailed results.

To be clear, this would be an educational exercise - not a signal service. The goal would be to show the process of transitioning a backtest to live trading. Tracking real-time paper trading performance could demonstrate how execution impacts results compared to simulated backtests.

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I have no problem with a live trading exercise as set out by Skate above. To be clear to all those reading, such an exercise would be for the purpose of an educational case study only and not a signal service.

A lot can be learned from a live trading exercise such as this and I hope that it proves to be an interesting and educational experiment.

Joe Blow said:

I have no problem with a live trading exercise as set out by Skate above. To be clear to all those reading, such an exercise would be for the purpose of an educational case study only and not a signal service. A lot can be learned from a live trading exercise such as this and I hope that it proves to be an interesting and educational experiment.

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The key points about the exercise of paper trading
The ultimate goal of this exercise is to show the process of transitioning from a backtest to paper trading and then on to live trading. Tracking real-time paper trading performance and signals in real-time should demonstrate how the execution impacts results compared to simulated backtests. The focus will be on improving the process without getting caught up in making paper money. The trading results are secondary to refining the strategy.

A risk-free environment
Paper trading allows you to take advantage of a risk-free environment to work on "developing good trading habits" by sticking firmly to the trading plan. The point of this exercise is to focus on refining your process, and the profits will naturally follow over time if the "trading idea" has legs. The measure of success will be the discipline developed which will ultimately lead to consistency.

Skate.

Reports analyse performance
Statistics are the true measure of performance, it's those that ultimately put the money into the bank. The secret of trading is keeping drawdowns to a minimum while letting the winners look after themselves. While statistics provide valuable data, the true stories lie in the individual trades. Behind every loss or gain, there are lessons to be learned. Since COVID shook up the markets, I've had both successes and setbacks. Here are five standout trades that have shaped my journey:



Skate.

Skate said:

Tracking real-time paper trading performance could demonstrate how execution impacts results compared to simulated backtests.

The live logs could include:
(a) Entry price versus backtest price
(b) Slippage on exits
(c) Execution delays
(d) Actual fill prices

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Skate, how are you going to calculate slippage and actual fill prices on a paper trading account?

The problem with paper trading is that it does not account for these things.

Roller_1 said:

Skate, how are you going to calculate slippage and actual fill prices on a paper trading account?

The problem with paper trading is that it does not account for these things.

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Great question, @Roller_1 and thank you for taking an interest in this thread
You're right that accurately estimating slippage and fill prices is crucial and is calculated by the difference in paper trading compared to actual backtest results, something @Captain_Chaza eluded to in a previous post.

When backtesting
It's easy to get fill prices that align perfectly with historical data. But real-world trading doesn't work that way.

AmiBroker is an extremely powerful backtesting tool
However, it has limitations when compared to real-world trading. Its backtests assume perfect entry prices and execution, which don't reflect market realities. In AmiBroker, a backtest simply takes the number of shares calculated and multiplies by the opening price. This "dumb math", fails to account for price slippage and spread. It optimistically assumes your order will be filled precisely at the open.

My trading plan accounts for this discrepancy
By placing orders in the pre-auction at a slight premium, I aim to secure the opening price. This helps control slippage that AmiBroker ignores in hindsight calculations. The backtest results, while useful, are theoretical. My goal is to replicate its simulated trades as closely as possible. However, the market involves constant adaptations and compromises. The pre-auction order strategy aligns my real trading to the backtest's simplistic assumptions.

The key takeaway is that AmiBroker is a powerful but rigid calculator
My trading plan aims to bridge the gap between its idealised backtest world and the fluid realities of the live market. This nuance is something no backtest can fully capture.

To make paper trading as realistic as possible, I account for slippage in a couple of key ways:
# First, I use the previous closing price as my benchmark for entry calculations, rather than optimistically assuming I'll get the exact opening price. This reflects the uncertainty of real-time order fills.

# Second, I factor in estimated slippage costs on each trade to account for the spread and liquidity. For example, I may reduce profit targets by a couple of cents per share traded. The exact amount depends on the closing price of the security.

Additionally
I cap my paper trades to reasonable position sizes that incorporate a premium to the last closing price. By accounting for slippage directly in dollar terms and factoring in realistic fill assumptions, I believe my paper trading provides a good approximation of real-world performance. The key is constantly comparing paper results to live trading outcomes as I'm always trying to improve the reliability of my paper trading methodology.

Previous discussed here

Skate.

Systematic trading seems simple, but it's not easy to follow consistently
The rules are straightforward, yet most traders struggle to adhere to them. Explaining the process of paper trading a strategy helps for good trading habits

Paper trading requires resilience which most traders lack
We tend to override systems with our own decisions, especially when facing strings of losses. Impatience causes us to exit winners too early or hold losers too long. We lack the discipline to "do nothing" and let trends run their course.

To succeed in trend trading
You must remove emotion and trust the system. Don't interfere with the rules or second-guess signals. Have the patience to weather drawdowns until the next winner comes. It takes mental fortitude and an acceptance that losses are part of the game.

# As trading legend Bill Williams (PhD) wisely said
"You will never go broke if you want what the market wants."

Don't fight the trend or force trades
Wait patiently for high-probability setups, then ride the wave. Follow the market's lead with discipline and resilience. This is the key to prospering in trend trading over the long haul. The rules are simple, but executing them consistently is extremely difficult. Success requires faith in your system, unwavering discipline, and mental stamina. Master this "human behaviour", and the technicals will take care of themselves.

Skate.

Roller_1 said:

The problem with paper trading

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Backtesting has its limits
Backtesting a trading strategy on historical data is invaluable but it's not foolproof. The markets are always evolving, so past performance doesn't guarantee future results. Relying solely on backtesting can breed overconfidence and complacency.

Trading In probabilities
We all trade in probabilities, not certainties with incomplete data. Backtesting provides an estimate of how a strategy may perform, but real-world trading introduces many additional variables.

No matter how robust the backtest
A strategy must be adaptive and flexible.

Paper trading builds experience
Paper trading allows you to gain experience executing trades in a simulation environment, without putting real capital at risk. It's a great way to test and refine a strategy after initial backtesting. The hands-on practice highlights practical issues that backtesting alone can't uncover.

Live trading Is the final test
Ultimately, the true test of a strategy is how it performs in live market conditions, with real money on the line. Paper trading provides an intermediate step to build up skills and confidence before committing capital. It bridges the gap between theory and practice.

In summary
Backtesting provides a solid starting point for developing a trading strategy. However, paper trading is essential to account for real-world complexities. Utilizing both historical data and forward simulation ensures your strategy is battle-tested before going live.

Skate.

Captain_Chaza said:

Sorry Capn Stakes
The Problem with Back tests is that they are not in Real Time
We have to Buy at the Sellers price

Have you tried growing some Turmeric in the mean time?

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We have plenty of turmeric actually captain.
Does it help against scorbut in your high sea ventures?

The Start of Paper Trading
When you see the “paper trading logo”, it indicates the discussion is concentrated on the “paper trading” exercise. If the markets keep performing, the “Dual Breakout Strategy” should start generating signals. Paper trading provides a risk-free environment to practice executing and managing trades without putting real capital at risk. It serves as a training ground to build experience and skills.

Through paper trading, beginners can learn essential skills like what identifying setups, entering and exiting positions, tracking performance, controlling emotions, and more. It allows safe testing and refining of strategies. Even experienced traders use paper trading to trial new ideas and techniques. The key is taking it seriously, tracking detailed records, and thoroughly reviewing both winners and losers.

The focus will be on improving the process over time rather than paper profits or losses. With persistence, paper trading can develop skills that translate to real-world trading. This exercise with a defined approach to paper trading is an opportunity to learn, not simply to make money on paper. Don't get discouraged by losses and instead focus on mistakes as lessons. It takes patience and discipline to maximise the benefits of paper trading.

The goal is to bridge the gap between theory and execution. Paper trading turns ideas and backtests into real-world experience and practical skills. It provides low-pressure repetitions to gain proficiency.

Skate.

Women are so cryptic
I came home this morning to a note from my wife on the front door "above the door handle" which read:

"I've tried and I've tried but this isn't working anymore, I'm sorry"

Bloody hell
I can't find anything wrong with the door handle and now I can't find my wife to ask what's wrong with it?"

Skate.

# 1. The Benefits of Paper Trading
Paper trading allows even veteran traders to master new strategies through low-pressure repetitions. The process refinements translate to real trading accounts. With patience, traders can use paper trading to transform backtesting theories and results into real-world practical experience. It bridges the crucial gap between ideas and execution.

Paper trading helps develop skills that pay off when you eventually transition to trading real money. With persistence and a focus on improving over time, the lessons learned are invaluable. Paper trading provides everyone an opportunity to practice executing trades and managing positions without risking real money. It serves as a risk-free training ground to build experience and skills.

Even experienced traders use paper trading to test new ideas. The key is approaching it seriously and reviewing it thoroughly. Focus on improving the process over time without worrying about paper profits or losses. It allows testing strategies and finding weaknesses without losing any trading capital.

Skate.

# 2. An overview of the "Dual Breakout Strategy"
The Dual Breakout Strategy is a systematic approach that uses Amibroker to test combinations of technical indicators and custom filters. It aims to identify emerging trends early while avoiding false breakouts.

The strategy enters up to 10 equal-weighted positions upon precise buy signals. Trades are managed with pre-determined exits like "stale stops", "trailing stops" and "profit targets". With a defined set of trading rules hopefully, it will maximise profits, and minimise losses.

Skate.

# 3. Buy Signal Logic
The Dual Breakout Strategy buy signals have multiple conditional requirements:
(a) A price breakout above recent support determined by the lowest low of the past 20 bars plus a volatility metric. This identifies potential breakouts with momentum.
(b) The Percentage Up index filters gauge market health and bullish/bearish bias. Breakouts must align with overall trends.
Requiring all conditions creates precise setups and reduces whipsaws.
(c) Custom filters check volume, liquidity, and overall market conditions. Stocks must pass all the filters to generate a buy signal.

In summary, the strategy identifies high-probability entries during emerging uptrends in quality stocks.

Skate.

# 4. Exit Rules and Trade Management
The "Dual Breakout Strategy" uses an exit strategy that incorporates trailing stops, profit targets, and n-bar cutoffs determined through rigorous testing. This defined exit strategy is a "balancing act" such as giving trades time to work while limiting losses when momentum stalls.

Following predefined rules builds discipline. Gaining experience managing positions with pre-planned exits develops skills that apply and carry over to live trading.

The key is tracking paper trades closely to refine execution versus the backtest. For instance, the number of shares purchased may differ between simulations and real paper trading due to the unknown opening price as discussed with @Roller_1 previously. It's vital to follow the signals as they have been calculated to improve the trading process.

Skate.

Skate said:

Women are so cryptic
I came home this morning to a note from my wife on the front door "above the door handle" which read:

"I've tried and I've tried but this isn't working anymore, I'm sorry"

Bloody hell
I can't find anything wrong with the door handle and now I can't find my wife to ask what's wrong with it?"

Skate.

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Bit of a Slow Learner - No wonder she Bolted