Monday, 21 February 2011

Groundhog Day

While today may be Presidents' Day in America, for me its Groundhog Day. These holiday days are always the same for me, at least most of them are. I use them for back testing.

The one thing that throws me, and most other people, off is the unknown. Fear of the unknown. The thing that makes me able to pull the trigger on a trade is the sure knowledge of my Trader's profile: my win rate, my drawdown, my maximum loss per trade, all my trading stats. I trade within my expectations.

I have a bunch of traders that I am mentoring and the answer to many of their questions is a one word solution: BACKTESTING.

Backtesting tells me what works and what doesn't. Backtesting tells me whether I should enter aggressively or not. Backtesting tells me how far out of the action my drop dead stop should be and backtesting tells me how large my average trade needs to be.

Backtesting and SIM trading are part of the roadmap to CP. 

Taking it easy today, so no chart.


  1. How do you go back (way back) to backtest market delta??

  2. MarketDelta has a great series on their blog currently talking about backtesting.

  3. Nathan, MD has RTL counters for most of the things you need to set up the back testing. The link above is a good place to start.

  4. How can you back test a discretionary method like yours? (e.g. looking at the overall picture, splitting profiles etc)

  5. Anon 07:28, read back to the beginning of the blog. You will see that I backtest the different components of the methodology without taking into account much of the context. That gives me over a 70% win rate. Many of my students are duplicating those stats and making the methodology their own.

  6. Tom,
    Thanks for this post...even though you've posted exactly the same thing over and over finally sank in and I was able to get 42 ticks so far on the Euro today(Tuesday). Thanks so much for this blog! I like how you keep trying new things and learning as well. By the way, How is Kiki doing these days?

  7. Anon 17:21, Thanks. Kiki's great. She's pretty independent now. I guess that was the idea.