I backtested 3 strategies for last 3 months data on crude oil and they give good returns but they perform very bad when i start trading in live market
1st strategy gave 18% return in month of july. 25% in august but when I started trading it gave a negative return of 10% in september and negative return of 20% in current month of october
Another strategy gave 15 % return in month of july. 30% in august, 25% in september and then I started trading the strategy in live market this month and i have got negative return of 25%. 10 out of 13 trades turned out too be losses.
Another strategy gave 25% return in july and I traded it in august and got only 1-2% return I didn’t trade it next month and i got 15% return. I started trading the strategy again this month and I got -5% return so far this month
why do my strategy stop working when I start trading on them ?
Are the demo and live accounts equally capitalised?
Are you trading same time-frame on both?
Any strategy rule changes between demo and live?
Do you allow for commission, slippage etc. when trading on demo?
All the above plus law of averages? I remember funding a gold trading account that had 12+ months of positive results, some spectacular. I was in for 3 months, lost as much as I was willing and bailed. I feared looking at the averages once I left, but would bet that they were up consistently after that. Other then the explanation that “they saw me coming”(I wonder if I’m the only one to ever think that?), IF it’s a good strategy, it just doesn’t work ALL the time. You only know if it’s good over an extended period of time?
i didn’t test on demo
only backtested from chart.
yes all the rules are same, its just a simple breakout strategy.
yes i calculate commission, taxes everything
same system gave good profit until i started trading
yes i get that not all strategies work all the time. Some months could be losses as well. That’s why i developed multiple strategies so if one of them performs bad other 2 can neutralise it. But my problem is when all of the strategy performs bad and not just bad very bad. 10 losses out of 13 trades. This just makes me anxious
Actually, a good strategy does work all the time if by all the time is meant all the time the trade set-up is correct.
So, a trend-following strategy produces profits when the set-up says follow this trend and you follow it and it continues. But a percentage of trends stall or reverse: the strategy says either hold on or get or let your stop-loss be hit - none of these occurring means the strategy has failed.
But the trend-following strategy also has a rule that if the trend set-up isn’t in place, you don’t take the trend. If a trend doesn’t occur in the market you’re looking at, that also does not mean the strategy has failed.
A strategy that fails when the market and chart behaviour in TA terms is identical was actually a poor strategy and was only profitable on a random basis. Even a high risk strategy can give a string of good returns, either because its been curve-fitted to a particular narrow scenario or, yes, due to the law of averages - even a trade based on a coin-toss will for some time definitely produce win after win.