How to use PRT walk foward test
- This topic has 16 replies, 5 voices, and was last updated 7 years ago by
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we still need extra work to determine which value is most stable instead of most profitable.
It’s true, like the “normal” optimisation module of the platform (without WF), the given result is the best performance first, but since WF module only return 1 result, you have to do the job by yourself by modifying the range of your variables values to find the best result that should fit your needs (less drawdown, better profit factor, less trades during a period, etc..). This is something I pointed to PRT developers and should be an improvement in future versions.
About how you should read the walk forward results:
Please keep in mind that this module is only suppose to help you have a clue about your strategy robustness by testing optimised variables in Out Of Sample periods (OOS), in 1 or more iterations.. As I already talked here and there about overfitting, it’s always a better idea to backtest a strategy on 70% of history while you develop it (IS), and then test it on the remaining 30% (OOS). If your result look similar in OOS than your IS test, the strategy have a better chance to continue performing the same way. Why? Because the 70% have certainly included a wide variety of price behaviour of the instrument (ranging, trending, market noises, economic news,..). With the WF Module you can now multiply this kind of tests in the past history with X iterations: understand X times making the same test in the past, optimise 70% and test in 30%, and so on until the end of the tests history.
Real life example:
Let’s imagine you have optimised a strategy over the last year (from January to December 2016), this is the IN SAMPLE period. The result seems great to you and then you decide to give it a try with your live account, so since January 1st 2017 you are trading it live, this is the OUT OF SAMPLE period. In March you take a look at the results and they are not the one expected, they are very bad instead. In conclusion, you have lost 3 months and real money. The WF module would have saved you from this inconvenience by making this job for you, on your computer screen while drinking a cup of coffee.
Because I seen so many times and so many people encountered this situation, I believe this tool was definitely something needed. It is now available, please use it! 🙂
So to be clear, this is 3 ways to use the new Walk Forward module:
- if you want to optimise the old way, you can! but instead of using the old optimiser, use the WF module and use only 1 iteration with 70/30 (better chance to have a strategy to be not so overfitted)
- you can also use the WF to determine how much (per your customized period, per year, per month, etc..) and so when relaunch a new optimisation by making many iterations in the WF window: if many of the OOS tests are >+50% (WFE=Walk Forward Efficiency), the strategy should be robust and benefit of X optimisations per period.
- use it with no optimisation at all. Instead, make an optimisation with a dummy variable that means nothing in your code to get the result of the OOS test, instead of do it manually (develop in 70% period and test in 30% period, like I said in the previous paragraph). This should replace completely the way you are using the backtester now!
I hope I’ve been clear, please don’t hesitate to ask questions. This thread could be the centralization about WF questions.
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