Simulated Trading
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As Nicolas has posted a great new blog on using simulated trading to improve strategy performance at:
https://www.prorealcode.com/blog/learning/how-to-improve-a-strategy-with-simulated-trades-1/
I thought that I would post something a little similar (but not as good!) that I wrote a while back. I have never used it in anger in a live or demo strategy as I felt the value of the average period was too critical as to whether it worked well or not. Maybe a better filter can be used?
1234567891011121314151617181920212223242526272829303132333435x = 20 //average periodpositionsize = 5 //tradesizeif equitycurve >= average[x](equitycurve) or tradecount <= x thentrading = 1endifif equitycurve < average[x](equitycurve) and tradecount > x thentrading = 0endifif trading and not onmarket thenbuy positionsize contracts at marketbuyprice = closetradecount = tradecount + 1endifif trading = 0 and not onmarket thenbuyprice = closetradeonmarket = 1endifif onmarket and close > positionprice or onmarket and close > high[1] thensell at marketequitycurve = equitycurve + (close - buyprice)endifif tradeonmarket and close > buyprice or tradeonmarket and close > high[1] thentradeonmarket = 0equitycurve = equitycurve + (close - buyprice)endifgraph equitycurvegraph average[x](equitycurve)graph tradingI tested it on the SP500 weekly. Obviously there is no real strategy involved as it just buys every week if it is not on the market and sells at the close of a week if it is in profit or if the week has closed higher than the previous weeks high.
As with all uses of an average it will be curve fitted dependent on the average period selected. Also just like Nicolas’s example the filter does not come into play until x number of trades have passed. It would be possible to alter the code so that these are either real trades or simulated trades depending on your appetite for risk I guess.
Here are the results with a period of 20:
Maybe a discussion on similar codes and the use of simulated trades will be of interest to someone?
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Here’s the same strategy entry and exit criteria but this one keeps a simulated record of the last 10 trades. If the last 10 trades add up to an overall loss then real trading stops and simulated trades are recorded. Real trading does not resume until the last last ten trades have returned to an overall profit.
Once again the filter is not applied to the first 10 trades.
12345678910111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455x = 10positionsize = 5lasttradestotal = trade1 + trade2 + trade3 + trade4 + trade5 + trade6 + trade7 + trade8 + trade9 + trade10if lasttradestotal >= 0 or tradecount <= x thentrading = 1endifif lasttradestotal < 0 and tradecount > x thentrading = 0endifif trading and not onmarket thenbuy positionsize contracts at marketbuyprice = closetradecount = tradecount + 1endifif trading = 0 and not onmarket thenbuyprice = closetradeonmarket = 1endifif onmarket and close > positionprice or onmarket and close > high[1] thensell at markettrade1 = trade2trade2 = trade3trade3 = trade4trade4 = trade5trade5 = trade6trade6 = trade7trade7 = trade8trade8 = trade9trade9 = trade10trade10 = close - buypriceendifif tradeonmarket and close > buyprice or tradeonmarket and close > high[1] thentradeonmarket = 0trade1 = trade2trade2 = trade3trade3 = trade4trade4 = trade5trade5 = trade6trade6 = trade7trade7 = trade8trade8 = trade9trade9 = trade10trade10 = close - buypriceendif//graph tradinggraph lasttradestotalgraph 0
This version will start applying the filter after the first trade as I realised that it is not necessary to wait. If the first trade loses then simulated trades are recorded but if it is a winner then live trading continues until the strategy goes into its first 10 trade negative equity.
1234567891011121314151617181920212223242526272829303132333435363738394041424344454647484950515253positionsize = 5lasttradestotal = trade1 + trade2 + trade3 + trade4 + trade5 + trade6 + trade7 + trade8 + trade9 + trade10if lasttradestotal >= 0 thentrading = 1endifif lasttradestotal < 0 thentrading = 0endifif trading and not onmarket thenbuy positionsize contracts at marketbuyprice = closeendifif trading = 0 and not onmarket thenbuyprice = closetradeonmarket = 1endifif onmarket and close > positionprice or onmarket and close > high[1] thensell at markettrade1 = trade2trade2 = trade3trade3 = trade4trade4 = trade5trade5 = trade6trade6 = trade7trade7 = trade8trade8 = trade9trade9 = trade10trade10 = (close - buyprice) * positionsizeendifif tradeonmarket and close > buyprice or tradeonmarket and close > high[1] thentradeonmarket = 0trade1 = trade2trade2 = trade3trade3 = trade4trade4 = trade5trade5 = trade6trade6 = trade7trade7 = trade8trade8 = trade9trade9 = trade10trade10 = (close - buyprice) * positionsizeendif//graph tradinggraph lasttradestotalgraph 01 user thanked author for this post.
I thought it would be nice to see if the ten day floating equity curve as a filter would improve a random strategy. So I wrote a strategy that bought the SP500 after a three day drop and sold if the price went over an average – nothing else – no stops or take profits and no more than one position held at a time. I used a spread of 1.6.
Here are the results:
Then I added the ten trade floating equity curve filter to see if it improved it at all. Here are the results:
The conclusion was that using the filter resulted in more profit, slightly better gain per trade, slightly better win ratio, less time in the market but most importantly a big improvement in draw down.
This sort of equity curve filtering may have some merit it seems but further testing is needed on the effect of such things such as number of trades used to calculate the floating equity curve before a full conclusion can be reached.
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More patterns for your tests: http://paststat.com/quant-ideas
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Another idea I am testing is comparing a five trade floating equity curve with a ten trade floating equity curve and only trading live if the ten trade curve is above the five trade curve.
12345678910111213141516171819202122232425262728293031323334353637383940414243444546474849lasttradestotal = trade1 + trade2 + trade3 + trade4 + trade5 + trade6 + trade7 + trade8 + trade9 + trade10lasttradestotal5 = trade1 + trade2 + trade3 + trade4 + trade5if lasttradestotal >= lasttradestotal5 thentrading = 1endifif lasttradestotal < lasttradestotal5 thentrading = 0endifif trading and not onmarket thenbuy 5 contracts at marketbuyprice = closeendifif trading = 0 and not onmarket thenbuyprice = closetradeonmarket = 1endifif onmarket and close > positionprice or onmarket and close > high[1] thensell at markettrade1 = trade2trade2 = trade3trade3 = trade4trade4 = trade5trade5 = trade6trade6 = trade7trade7 = trade8trade8 = trade9trade9 = trade10trade10 = (close - buyprice) * positionsizeendifif tradeonmarket and close > buyprice or tradeonmarket and close > high[1] thentradeonmarket = 0trade1 = trade2trade2 = trade3trade3 = trade4trade4 = trade5trade5 = trade6trade6 = trade7trade7 = trade8trade8 = trade9trade9 = trade10trade10 = (close - buyprice) * positionsizeendif1 user thanked author for this post.
You have almost rewrote “Dual momentum” theory from scratch
Almost… but with errors! I just noticed that I am comparing the first 5 trades in the 10 recorded trades instead of the last 5 trades. Here is the corrected code:
12345678910111213141516171819202122232425262728293031323334353637383940414243444546474849lasttradestotal = trade1 + trade2 + trade3 + trade4 + trade5 + trade6 + trade7 + trade8 + trade9 + trade10lasttradestotal5 = trade6 + trade7 + trade8 + trade9 + trade10if lasttradestotal >= lasttradestotal5 thentrading = 1endifif lasttradestotal < lasttradestotal5 thentrading = 0endifif trading and not onmarket thenbuy 5 contracts at marketbuyprice = closeendifif trading = 0 and not onmarket thenbuyprice = closetradeonmarket = 1endifif onmarket and close > positionprice or onmarket and close > high[1] thensell at markettrade1 = trade2trade2 = trade3trade3 = trade4trade4 = trade5trade5 = trade6trade6 = trade7trade7 = trade8trade8 = trade9trade9 = trade10trade10 = (close - buyprice) * positionsizeendifif tradeonmarket and close > buyprice or tradeonmarket and close > high[1] thentradeonmarket = 0trade1 = trade2trade2 = trade3trade3 = trade4trade4 = trade5trade5 = trade6trade6 = trade7trade7 = trade8trade8 = trade9trade9 = trade10trade10 = (close - buyprice) * positionsizeendif1 user thanked author for this post.
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