[JayC]

How long, generally, do you like to back test a trading system, to become confident? It seems the markets are always evolving and changing. Will a true mechanical trading system, work in all markets? Or do they constantly need tweeking?

Just wondering some of others' thoughts on this.

JC

Backtest it for at least a 3 year period and then optimize when the equity curve starts to deteriorate.

Regards

[Head2k]

Originally Posted by JayC »

How long, generally, do you like to back test a trading system, to become confident? It seems the markets are always evolving and changing. Will a true mechanical trading system, work in all markets? Or do they constantly need tweeking?

Just wondering some of others' thoughts on this.

JC

Hi, when I was first attracted to trading I started with mechanical systems. Programming, backtesting, optimizing etc. Then I started trading live one of the systems I developed. It took me about one week to find out that this was not the way. I couldn't be confident with my system, no matter what results it showed in backtest, because I simply didn't understand the market. I think confidence comes from understanding, knowing why you are doing what you are doing. And then from testing. Some people are probably OK with testing only to be able to gain confidence, but that wasn't my case.
To your second question:
I don't think one system will work in all markets or market phases. Surely you will adapt your systems for different vehicles. Also there are ways of detection the phase of the market (sideways / trending) to some extent. There are also ways of detection of volatility. Hence you can make your system adaptive to some extent (so it is at least not losing much during an unfavorable phase). And to smooth your equity curve you can run more uncorrelated systems at the same time.

[januson]

Hi Head2K

Is it an automated system you're talking about or you sitting there executing the trades according to some signals printed at a chart? Day or intraday?

If your system needs optimizing you should discard it right away! You should however develop a system to a standard stock, i.e. high volume most of the time. Forget about sideways or trending, when you think like that you're allready starting to see problems instead of solutions. If a stock is moving sideways, it just mean no money or at least less money, your system should react to this!!

I don't think one system will work in all markets or market phases.

It is a loser coming to talk, allready preparing himself to get ripped of!! (Sorry, but you deserved that )

Whats a system then? A system should certainly work under all market conditions, you've to build the the conditions into your system i.e. don't trade between the first hour, don't trade the last hour or if volume is lower than 40% of normal HALT system, 3 loses in a row in a choppy market HALT or change observation period/ view / whatever.
I don't think the markets are evolving, but I think the people are.... they enter, they trade, they get some experience, they get more experience, they go away of one reason or another.

[Head2k]

Reading your response, januson, I realize I didn't delve into the system development enough. And I am also glad I shifted to discretionary approach.

[januson]

Many people don't realize what a system actually is before they sit down and try to program it. If you can't code it then you'll find yourself strugling with confusion. And that's why so many chooses the dicretionary approach, because a discretionary approach is flexible all the time

[sevensa]

Originally Posted by januson »

Many people don't realize what a system actually is before they sit down and try to program it. If you can't code it then you'll find yourself strugling with confusion. And that's why so many chooses the dicretionary approach, because a discretionary approach is flexible all the time

I think you are confusing trading on the seat of your pants with real discretionary trading. That is why many traders fail with a discretionary approach because they think like you do that it is flexible all the time. This is simply not true. You still need a very rigid trading plan and rules even with a discretionary approach to have the best chance of success.

[BlowFish]

Originally Posted by januson »

Hi Head2K

Is it an automated system you're talking about or you sitting there executing the trades according to some signals printed at a chart? Day or intraday?

If your system needs optimizing you should discard it right away! You should however develop a system to a standard stock, i.e. high volume most of the time. Forget about sideways or trending, when you think like that you're allready starting to see problems instead of solutions. If a stock is moving sideways, it just mean no money or at least less money, your system should react to this!!


It is a loser coming to talk, allready preparing himself to get ripped of!! (Sorry, but you deserved that )

Whats a system then? A system should certainly work under all market conditions, you've to build the the conditions into your system i.e. don't trade between the first hour, don't trade the last hour or if volume is lower than 40% of normal HALT system, 3 loses in a row in a choppy market HALT or change observation period/ view / whatever.
I don't think the markets are evolving, but I think the people are.... they enter, they trade, they get some experience, they get more experience, they go away of one reason or another.

The thread is about mechanical systems whether automated or not is kind of academic it could be automatic, broker executed, or self executed.

I wonder if you are actually talking about fully mechanical systems? as most of what you are saying is contrary to my experience. It's also contrary to what most systems designers, who also publish, write. Do you trade a mechanical system(s)? How long have they been working?

I am interested cause it sounds like you have discovered the holy grail if you have a system that can use the same entries for trend and consolidation that works in all market conditions under all levels of volatility and never needs tweaking or putting on the shelf for a while