Good morning I would be very grateful to anyone of you who could help me evaluate my results below. background: I am a veteran manual trader (28 years) -- but i am new to automated trading. I have spent last couple years trying to automate what I do, the last 7 months doing nothing else (all my trading in last 7 months has been through my programmed subroutines). I am producing promising results, but I don't know how to judge these results against industry standards. we all know what constitutes good trading results in bonds or stocks, but what constitutes good results in auto? are my results good? are they... too good? (maybe i need to look for an error?) outline of project: 1) i trade only S+P 500- stocks. at the moment long only, though i hope to add a short element in the future. 2) at this point I initiate trade manually and the subroutines work the position and exit automatically on signal. it is perfectly possible to program the initiation so that it becomes 100% automated (runs itself) but doing this will require a lot of work from me (i am a beginner coder), so I would like to know whether I am not completely offbase here. 3) trade initiation is based on conditions which have been backtested on the 2010-2019 period. 4) results since April 2 are: number trades: 240 (average of 32 trades per month) average duration of a trade: 13.45 days average number of open positions: 33 average return: 2.6% average winning trade: 3.3% average losing trade: -0.53% % winning trades: 93% (?!?!?!) portfolio return since April 2: 39.54% (! SPY 27.64%) turnover: ~130% PER MONTH and now the killer: this is how my method worked during the September correction: program SPY 09/02/21 1.0000 1.0000 09/09/21 0.9986 0.9907 09/16/21 0.9920 0.9867 09/23/21 0.9802 0.9779 09/30/21 0.9733 0.9469 10/07/21 0.9984 0.9679 10/14/21 0.9961 0.9764 10/21/21 1.0340 1.0009 10/28/21 1.0080 1.0113 11/04/21 1.0136 1.0303 11/11/21 1.0604 1.0311 and the chart (blue is method, orange is SPY): By 9/30 SPY was down -5.3% and i was down -2.63%. Sharpe Ratio seems to be something stupid like 16+. where am i going wrong?
For longer term, it be best if you started back testing from 1998 so you can see how it perform when market was in major declines. Your testing been in very bull market. IMHO
Yes... thank you. i have thought about this. but... the reason why I did not test it through the bear markets is three fold: 1) first, i expect the immediate future to be more bull than bear, so bull market testing is more appropriate for the present (i think). i assume no interest rate hikes until end 2022 (perhaps middle 2023). (manual trader talking) 2) in the case of both bear markets GFC (2007-2009) and Covid (2020) i could see miles off to get out of the market ahead of time. both crashes were amply advertised ahead of time for anyone that actually paid attention. (I went to cash Dec 2007 and again January 2020). So, excepting an event like 1987 or 2001 (9/11), in which case there isn't a whole lot anyone can do except pull the plug, i am not too worried about a bear market performance. i assume i will just go to cash. yes? 3) because the routine uses a kind of price discovery gizmo, it can't really be back tested. all that can be backtested are the general conditions under which as stock should be given to my routine to trade. its the actual trading which gives me the clue -- in this case, September hiccup looks very good relative to market in general. but I will backtest the starting conditions like you suggest going back to 1998. i will take out the periods when I was in cash -- if I knew it then, I would not have been trading then, yes? bad thinking on my part?
qlai youre talking to a newbie here, what is MAE? losing trades last a lot longer = 22 days on average i am toying with a rule to cut bait which would cut losing trades earlier. doing this will probably increase the loss on the losing trade, but as it will mean fewer days holding a rotting carcass, it just might improve the overall performance
If you are only testing against bull market and only going long just BTFD already and be done with it. Just don't think that is what trading is.
Maximum Adverse Excursion. You said you are a veteran of 28 years. But you loose all credibility with me if you say stuff like this:
sorry. but true. i was not in the market from December 2007 until January 2009. i come from EM debt background, i am good at sitting on my hands. I also went to cash in January 2020 because I read Chinese and could see the news. if this is incredible, then I am really worried. if maximum adverse excursion means "worst trade" it is was an embarassing -1.10%
well, manual trader guys who have only ever worked for their own account just may not know the jargon im a pharmacologist by education and a advertising exec by experience. i am not a quant, or a mathematician, or a GS graduate. i have come here to learn something. do you want to help?