Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Guest OILFXPRO

Back Tests Are Useless for Manual Traders

Recommended Posts

Guest OILFXPRO

All back tests are useless because the mental edge/phsyche is not tested , and this is 80 % of trading success.The system is backtested , but the trader is not back tested for skills to execute the system , 80 % of the trading armoury is mental skills of the trader.

 

Give a wining system to 100 traders and 99 percent will lose due to impatience , lack of discipline , greed , fear , emotions. ,biases , lack of certainty. , inability to trade with uncertainty ,revenge trades , monkey brain responses , the need to be right , stress responses , lack of knowledge experience and a dozen other psychological reasons.

Share this post


Link to post
Share on other sites
All back tests are useless because the mental edge/phsyche is not tested , and this is 80 % of trading success.The system is backtested , but the trader is not back tested for skills to execute the system , 80 % of the trading armoury is mental skills of the trader.

 

They are equally useless for automated systems... But that's another issue

Share this post


Link to post
Share on other sites
Guest OILFXPRO
They are equally useless for automated systems... But that's another issue

 

That is why there are so many fre profitabbe systems for free ,and more vendors than traders ......in the zoos of the internet.

5aa7121309d36_forumchimps.thumb.jpg.eee91b57a6bd2c4e0f08ea45f4512a77.jpg

Share this post


Link to post
Share on other sites

Profitable trading is not all about trade signals. Unfortunately, too many traders misuse back testing beyond what its primary purpose...to only help design a trade method.

 

Simply, traders forget that a trade method is just one chapter in the book called "trading plan". That's why its so common to see so many trade journals by traders that say they are confused or lost for words because they had positive trade results in back testing but can not understand why they are losing money in real money trading.

 

Why ? Traders can not incorporate things like discipline problems, changes in trading schedule, unexpected changes in market conditions and other things into back testing. In fact, a trader can only discover "some" trading problems when one moves into simulation trading. It's those "some" trading problems that will prompt naive traders into returning back to the back testing phase to tweak (fix) their trade method when the problem has nothing to do with their trade method that originally had positive trading results.

 

The problem is the trader in situations as described above and that's why trade methods is just one chapter in the book called trading plan.

 

Therefore, back testing is useful for the sole purpose designing a trade method and shouldn't be used to compensate beyond that because everything else (e.g. discipline) involved in profitable trading can not be incorporated into back testing.

Edited by wrbtrader

Share this post


Link to post
Share on other sites
Guest OILFXPRO
Profitable trading is not all about trade signals. Unfortunately, too many traders misuse back testing beyond what its primary purpose...to only help design a trade method.

 

Simply, traders forget that a trade method is just one chapter in the book called "trading plan". That's why its so common to see so many trade journals by traders that say they are confused or lost for words because they had positive trade results in back testing but can not understand why they are losing money in real money trading.

 

Why ? Traders can not incorporate things like discipline problems, changes in trading schedule, unexpected changes in market conditions and other things into back testing. In fact, a trader can only discover "some" trading problems when one moves into simulation trading. It's those "some" trading problems that will prompt naive traders into returning back to the back testing phase to tweak (fix) their trade method when the problem has nothing to do with their trade method that originally had positive trading results.

 

The problem is the trader in situations as described above and that's why trade methods is just one chapter in the book called trading plan.

 

Therefore, back testing is useful for the sole purpose designing a trade method and shouldn't be used to compensate beyond that because everything else (e.g. discipline) involved in profitable trading can not be incorporated into back testing.

 

Why not forward test with real money ?

Share this post


Link to post
Share on other sites
Guest OILFXPRO

how do u design useful back tests for the following?

 

Have you done a thorough job? back test design for human errors and mistakes .:helloooo:

 

• If no, stop wasting mine and everybody else's time.

• Are you impatient?

• Are you jumping into this trade ?

• Are you waiting for your need to be right and delaying entry?

• Is this a revenge trade?

• Are you exiting on emotions?

• Are you exiting, not according to the system , but according to your emotional state?

• Are you thinking rationally, after a loss?

• Have you exited to satisfy your mood?

• Do you not have the patience to wait for a high probability trade?

• Are you going to remain a 50/50 trader all your life?

• Can you not think like a high probability trader?

• Can you not pass on this trade?

• Are u putting on this trade impatiently, so you do not miss trades?

• Do you not have the discipline to stick to system rules?

Share this post


Link to post
Share on other sites

In trading terms, you can't back test for psychological problems that impacts trading results. Yet, you can keep a daily log and maintain statistics of those things you've mentioned.

 

Also, I would assume that if someone gets professional help via a "psychologist" to improve their ability to manage stressful situations in life...it should be able to be transferable into trading or into any other job. By the way, there are psychologist out there that specifically help those that work in the financial markets.

 

Think about this very carefully, more people today in life (I'm not talking about trading) are under extreme stress in their personal life, relationships, jobs, school and such. Worst, more folks today are not able to properly manage such psychologically. In fact, more jobs today than ever will pay for psychologist, pay leave of absence due to burn-out and some even have a staff psychologist on site at the work place.

 

Further, more jobs today are using employment psychological testing to determine if someone is suitable for the job. I can't remember the occupational agency but its estimated that companies that use psychological testing save millions in comparison to those that don't.

 

How many traders keep daily statistics of their psychological performance while trading ?

 

Its a lot less (I'm guessing < 1%) than those that keep daily statistics of their wins/losses.

 

 

 

 

how do u design useful back tests for the following?

 

Have you done a thorough job? back test design for human errors and mistakes .:helloooo:

 

• If no, stop wasting mine and everybody else's time.

• Are you impatient?

• Are you jumping into this trade ?

• Are you waiting for your need to be right and delaying entry?

• Is this a revenge trade?

• Are you exiting on emotions?

• Are you exiting, not according to the system , but according to your emotional state?

• Are you thinking rationally, after a loss?

• Have you exited to satisfy your mood?

• Do you not have the patience to wait for a high probability trade?

• Are you going to remain a 50/50 trader all your life?

• Can you not think like a high probability trader?

• Can you not pass on this trade?

• Are u putting on this trade impatiently, so you do not miss trades?

• Do you not have the discipline to stick to system rules?

Edited by wrbtrader

Share this post


Link to post
Share on other sites
how do u design useful back tests for the following?

 

Have you done a thorough job? back test design for human errors and mistakes .:helloooo:

 

Companies do try this using psychometric tests before hiring.

they also put in place controls and managers and other such elements to ensure traders either have the support needed or risk limits required, or the mental abilities required. They also usually either hire qualified people with proven track records, or they provide training for this.

This is probably as good as it gets and would be the bare minimum rather than simply blaming the trader.

 

As for back testing humans......

If you consider back tests on automated machines to be rather 'interesting' but not much good in reality and then try to apply the same thought processes to humans ----- there is not much to say really other than rethink what you are trying to do.

Share this post


Link to post
Share on other sites
Why not forward test with real money ?

 

Well, because if you don't have a tested, prove system, and you just jump in with real money you are far more likely to lose everything you have trying to develop a system, than not.

 

Back testing works. However, that said one needs to understand the context. For example, back testing, especially in manual systems, cannot test the entry on an evolving bar.

 

If you have a trading idea, you need to understand the progression.

 

1. come up with an idea.

2. Back test it.

 

3. Now, *IF* it is working in back testing, the next step is to use a simulated account with real time data to test it over time in simulation.

 

4. If you are successful over the majority of the most common market conditions, then, and only then do you begin to test it with real money.

 

Back testing is only *Part* of system development. If you skip any of the steps in the progression, failure is the most likely outcome.

 

 

 

Futures & Commodities trading is High Risk due to highly leverage markets.

THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL.

THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN ATTAINABLE IN COMMODITY TRADING CAN WORK FOR YOU, AS WELL AS AGAINST YOU.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date: 31st March 2025.   Trump Confirms Tariffs on All Countries, Sending Stocks Lower.   The NASDAQ continues to trade lower due to the US confirming the latest tariffs will be on all countries. In addition to this, bearish volatility also is largely due to the higher inflation data from Friday. The NASDAQ declines to its lowest price since September 11th 2024. Core PCE Price Index - Inflation Increases Again! The PCE Price Index read 2.5% aligning with expert forecasts not triggering any alarm bells. However, the Core PCE Price Index rose from 0.3% to 0.4% MoM and from 2.7% to 2.8% YoY, signalling growing inflationary pressure. This increases the likelihood that the Federal Reserve will maintain elevated interest rates for an extended period. The NASDAQ fell 2.60% due to the higher inflation reading which is known to pressure the stock market due to pressure on consumer demand and a more hawkish Federal Reserve. Boston Fed President Susan Collins recently commented that tariffs could drive up inflation, though the long-term impact remains uncertain. She told journalists that a short-term spike is the most probable outcome but believes the current pause in monetary policy adjustments is appropriate given the prevailing uncertainties. Although, certain investment banks such as JP Morgan actually believe the Federal Reserve will be forced into cutting rates. This is due to expectations that the economy will struggle under the new trade policy. For example, JP Morgan expects the Federal Reserve to delay rate cuts but will quickly cut towards the end of 2025. Market Risk Appetite Takes a Hit! A big factor for the day is the drop in the risk appetite of investors. This can be seen from the VIX which is up almost 6%, Gold which is trading 1.30% higher and the Japanese Yen which is the day’s best performing currency. Most safe haven assets, bar the US Dollar, increase in value. It is also worth noting that all indices are decreasing in value during this morning's Asian session with the Nikkei225 and NASDAQ witnessing the strongest decline. Previously the stock market rose in value as investors heard rumours that tariffs would only be on certain countries. This bullish swing occurred between March 14th and 25th. Over the weekend, President Donald Trump indicated that the upcoming tariffs would apply to all countries, not just those with the largest trade imbalances with the US. NASDAQ - Technical Analysis In terms of technical analysis, the NASDAQ continues to obtain indications that sellers control the price action. The price opens on a bearish price gap measuring 0.30% and trades below all Moving Averages on all timeframes. The NASDAQ also trades below the VWAP and almost 100% of the most influential components (stocks) are declining in value.     The next significant support level is at $18,313, and the resistance level stands at $20,367.95. Key Takeaway Points: NASDAQ falls to its lowest since September 2024 as the US confirms tariffs on all countries, adding to inflation concerns. Core PCE inflation rises to 0.4% MoM and 2.8% YoY, increasing the likelihood of prolonged high interest rates. Investor risk appetite drops as VIX jumps 6%, gold gains 1.3%, and safe-haven assets outperform. NASDAQ shows strong bearish momentum, trading below key technical levels with support at $18,313 and resistance at $20,367.95. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Michalis Efthymiou HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • PM Philip Morris stock, top of range breakout at https://stockconsultant.com/?PM
    • EXC Exelon stock, nice range breakout at https://stockconsultant.com/?EXC
    • UTZ Utz Brands stock, watch for a bottom breakout at https://stockconsultant.com/?UTZ
    • FL Foot Locker stock, nice breakdown follow through at https://stockconsultant.com/?FL
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.