Priority of variables in backtesting
- This topic has 11 replies, 4 voices, and was last updated 5 years ago by
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When ur backtesting u want a smooth EQ curve and pretty much the same avtg win pr year every year if possible. If your backtest have 1-2 REALLY GOOD YEARS and 5 very much less profitable years, then uve probably curved it for those 2 years.
if u tho have 10 years all look around the same avg gain pr year then thats alot better. u can also view the smoothness of the EQ curve. u dont with high spikes here and there where backtest is perfect, and then crap other places..
avg gain pr trade is very important cus its gonna tell u something about how much u can afford to loose on each trade. if u make 15$ pr trade then u shouldnt worry too much about spread and slippage. if u make 2$ avg gain pr trade, then u rprobably gonna loose those 2 to spread and slippage (unless uve calculated backtest with correct avg spread + add something for the slippage..
Max DD is all about getting it under a limit that ur comfortable with. I wouldnt run something that have 3000€ drawdown trading a 1€ contract. but thats me.. dosnt mean the system cant be profitable, just means my limit is a long time b4 reaching 3K drawdown..
Max loss cons. is gonna tell u how much pain u gotta take. If u see 22 max loss in a row, then u have to sit through 22 painstaking losses, each loss making it harder and harder to keep running the system… (u probably need a better filter lol)
Winrate is of course important ass well, but u gotta be realistic about ur winrate in my opinion.. If ur trying to catch every trend going up, then ur gonna probably look at 35% -> 50% winrate. If ur trying to mean revert everytime price is extreme volatile then u should hopefully be look at 60-80% winrate.. then ofc u can add trailing stops etc to make some strategies better.
When it comes down to “what should i focus on”? Everything hehe! If all of the above is looking good u should see steady profits each year..
Edit: i can add that when u backtest u rly wanna scroll through the top 50 or smthn.. cus even tho #1 might have the most profits, if u move down to say #12 u might miss out on 200€ in a totalt of 10 years or whatever, but ur EQ curve can look so much better and even.
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Edit: i can add that when u backtest u rly wanna scroll through the top 50 or smthn.. cus even tho #1 might have the most profits, if u move down to say #12 u might miss out on 200€ in a totalt of 10 years or whatever, but ur EQ curve can look so much better and even.
Which is why it would also be great if the results window included a column for maximum draw down and lots of other helpful information to sort by.
In addition to your comments I would add that the number of trades is also important. Too few trade and the data sample you have to work with is too small to have much confidence in it. Evenly spaced positions throughout the test period is a good sign too – you don’t want one trade a year and then twelve in the last year for example.
Time in the market is also important as well as average and maximum trade length of time. Time in the market is time with risk on and just one trade with a very long time in the market can eat into profits with fees – plus could you actually sit there for six months watching a trade go up and down and sucking fees out of your account or rolling over and costing you spread each time when most of the other trades were in and out in a day?
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