Profitable Trading SystemPosted by Nick Niesen on November 8th, 2010 After you have found a profitable trading system that you already back-tested, how can you be sure that this system will produce the same gains in future? Test 1 : Make sure that you put liquidity rule, that your entry and exit prices are realizable. Test 2: Examine again your trading systems and your rules (This is very important). Test 3: Change twice or 3 times the date of begin for the simulation, if it still show good results then it has passed the test 3. Test 4: Change values of some parameters or variables you have in your trading system rules, you must change one value and then back-test, change another and then back-test... Test 5: Try to restrict the system from buying 20% or more of stocks you previously bought when doing the back-test. Then re-run the back-test. To pass this test, system must show pretty the same results as before. Test 6: Equity chart must have a good look, check some statistic values like sharpe ratio, sortino ratio, standard deviation, maximum drawdown, average day for gains recovery... Theses tests are very restrictive and you will reject maybe all your trading systems, but when trading you will put your money, real money, so i think you must be very selective to make all chance in your side. Like it? Share it!More by this author |