20 Mar The Best Testing Method Ever
The Best Testing Method Ever
Mar. 20, 2023
I love everything about trading.
Except one thing.
I don’t love questions about the “best way to test”.
It’s like saying, “What’s the best grip to use for my forehand?”
There is no “best” grip. While some grips will put a permanent ceiling on your potential, many, many grips are perfectly okay.
The best grip is not some special concoction brought down from a secret pro in the Tibetan mountains. The best grip is the one that allows you to hit the ball in.
To have endless discussions about the pros and cons of western v. semi-western grips is pointless and makes me want to set myself on fire.
And trading is no different.
You can use Profit Factor, Return on Account, max drawdown, or max profit. Or a combination.
You can use the profit to drawdown ratio, Sortino ratio, or average trade size. Or a combination.
Or something else.
To discuss which one of these is best makes me want to stick my hand down a garbage disposal.
Because there’s only one thing that matters.
Watching it trade.
When you turn on a robot, what does it do?
Or, if you’re testing, build a robot and then watch it trade.
For months. Or years.
Watch it trade untouched for a long time. If it works, then it really works.
No ratios or out-of-sample configurations or Genetic testing tricks matter.
Does it make money or not?
Which is why I love going back to old systems. Old systems tell the truth. If it works after I write about it, then I get very excited.
So, with that in mind, here’s an old post from 2018 on the “Twitter Trend” method. You can read it HERE.
This system is overly simple and people who like to argue could definitely find 14 things wrong with it. It gets Long on a Daily chart when price is above the 100 SMA, RSI goes Oversold and then crosses back up out of Oversold. It exits when RSI closes into Overbought. No stops, no targets.
But the real question–the question that matters– is: how has it done since 2018?
In the post, I moronically used the AUDJPY. Who only goes Long in Forex?
The Equity Curve from 2005-2018 looked like this:
From 2018 to now, the Curve looked like this:
And here’s the Report from 2018-now trading 1 lot each time:
It’s still working.
I don’t need Z-Score or the Ulcer Index. I just need to know if it’s worked going forward.
And, astoundingly, it has.
Here’s the really crazy part. It works even better on other instruments.
And we’ll look at those in the next Newsletters.
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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.