Monday, January 18, 2010

Two periods in time

This post looks at difference for two different 9-month periods.

Back test was done for exponential moving average (EMA) crossover strategy on J200 (Top40) 15 min chart.

First screen capture shows period from 01. July 2008. to 01. April 2009. System was optimized for values between 6 and 8 for shorter moving average and for values between 20 and 22 for longer moving average. During those 9 months the best system made 17317 points from 204 trades with ratio of average winner and average loser being 2.91. Value for this particular EMA combo was 8 and 21 periods.

Second screen capture shows period from 01. April 2009. to 01. January 2010. System was optimized for identical values as in the above mentioned case. During these 9 months best system made 10187 points from 233 trades with ratio between average winner and average loser being 2.53. Value for best EMA combo was 6 and 22.

If we take same look-back with, let’s say, EMAs 7 and 21 we see the following picture:

Period I (01. July 2008. to 01. April 2009.): 16195pts, 216 trades, Avg.W/Avg.L = 2.77;

Period II (01. April 2009. to 01. January 2010.): 9748pts, 226 trades, Avg.W/Avg.L = 2.66.

Simply, all basic metrics of this system dropped since 1. April 2009. Number of points has decreased by amazing 39.8%. Less points in more trades with worse average winner/average loser ratio is simply not good for trading and this is why so many traders are struggling and looking for new systems.

Will this systems start to perform as good as before again? Are all these systems broken?

If you asked me on 1. January 2010. if I would like to have 1000 points per month guaranteed I would gladly accept that offer - any time, any market conditions and with no regret if chosen system starts to produce 2000 or more points per month.

As we can see, systems made around 1000 per month from 1. April 2009. till end of the year, so if you ask me – systems are still working and there is no need for change. If you want to see what 1000 points per month does in one year, please revisit one of previous posts:

“Realistic goals” ---

All what we need to change is our own discipline in following systems, because missing good trades now can cause us not to make money. Please concentrate on execution and discipline and money will come.

“System development and testing never stops.”

Trade with trend!


Nilesh Moodley said...

Great post Igor - I like the logic and reasoning you applied with systems trading and how your related it to having discipline.


JDT said...

Thanks for all your effort and commitment in assisting others with trading. I appreciate it tremendously.

Alsi Trader said...

Thank you Nilesh for kind comment and for continued interest.

Alsi Trader said...

JDT, thank you for kind comment.
Will try to keep it up and share.

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