How long should I test a strategy for?

Trading Systems
#6

Haha I love this. How long is a piece of string!

1 Like
#7

I suggest try to test it in your demo account till you are 100% sure of the strategy, It is simply not worth losing your money in actual market when you could have already identified and avoided your losses. Hence dont be in a hurry to go for live trade, Backtest and papertrade your strategy a lot.

2 Likes
#8

I will certainly keep my trust in the strategy even if it doesn’t perform exactly as well as I want it to, a constant profit is way much better then consistent losing with one big win here and there

#9

@steve369

I can see you focus on the fundamentals on the markets quite a lot, don’t get me wrong it should be a daily habit to make sure you’re not entering into a market about to flip, however I do rely more on the technical side but I will definitely keep this in mind, thanks for the input

#10

Would you say this is more based on performance than on 100% certainty? How would you define “100% sure”?

#11

Less than 2 years… definitelly too short.
I started algo trading in 2015 and I backtested on 4 years.
Now I am backtesting on 6-8 years.
I know traders that are happy only with 10 years.
Also the number of trades matters, it should be at least 300.

2 Likes
#12

Here is my 2 cents worth of advice. Demo trade the strategy until you have a minimum sample of 100 fully executed setups and evaluate the performance. If you could trade more than 1000 setups, that’s even better. The reason why I say fully executed setups is that, you might be using a multiple entries on one trade, and could be confused as multiple trades. So to avoid such, count the setups instead.

2 Likes
#13

Hi, go back to your code and find out why the testing is not matching the demo. There is an error in your coding and testing process, it should match exactly to the demo testing. Use Mt5 for coding and testing. This will give you the confidence to move forward with the system you have developed. Your time frames are too short, test over 5 years, and do a minimum of 500 trades per currency pair. When you trade on the demo you will know with the first 100 trades if your coding and testing process is working properly. 76% win ratio is not high enough for consistency of system return and phycological confidence in the system you have developed.
Regards

1 Like
#14

WHAT??? And here I’ve been trolling around all this time waiting for one of you yardbirds to let slip where I can get that magic pill that makes me take only winning trades… :stuck_out_tongue_closed_eyes:

I’ve kinda been wondering about that: how much did Covid change the baseline? I mean, with all this talk about “the new normal” is backtesting prior to March 2020 still valid?

#15

I trade manually

#16

There is nothing “normal”… :rofl:
Or everything is normal if you prefer.
I want my stragies to work pre covid, covid and post covid, just like pre brexit and post brexit, pre Draghi and post Draghi, pre Trump and post Trump …
A robust strategy should be able to survive and prosper trough many market conditions.

3 Likes
#17

:face_with_raised_eyebrow:

Do you mean backtest was also MANUAL?

#18

Yes indeed

1 Like
#19

Hi,
I suggest you add information like trading and back testing manually when you post a question. Manually back testing is inefficient and inaccurate. Move into the 21st Century and use the power of algorithms to assist your testing & trading. Its like driving a horse and cart on the road while all your competitors are driving cars.
Regards

2 Likes
#20

@Jckbt

So you suggest I take the time to learn how to algo trade which I am already interested in. Thanks for the advice, would you have any links or places where I could start to learn?

#22

you know you have a bad strategy when you have a few good days of trading and then you have a full on losing streak for 2 days or more. Overall your strategy isn’t good I think if you don’t come out in the positive 2 weeks in a row.

You know you found a good strategy when you are profitable week after week very consistently for months and months. You still will have losses but overall you should be profitable. You may still have a week where you arn’t but shouldn’t occur often

#23

exactly, and if you trade price action on higher timeframes, you don’t need to worry about fundamentals nearly as much

#24

it probably takes around 10 years to go through most of teh economic conditions which define markets - bull / bear / sideways etc

However you say your strategy is not successful ! - dump it then ! :slightly_smiling_face:

#25

The length of time you should test a trading strategy depends on several factors, such as the type of strategy, the time frame you’re trading on, and the number of trades it generates.

Here are some general guidelines to help you determine an appropriate testing period:

  1. Sample size: Aim for a minimum of 100 trades to get a reasonable idea of the strategy’s performance. A larger sample size, like 200 or more trades, is even better as it helps to reduce the impact of outliers and provides more reliable results.
  2. Time frame: If you’re trading on a shorter time frame, like minutes or hours, you can test your strategy over a shorter period, like a few weeks or months. If you’re trading on a longer time frame, like daily or weekly charts, you should test your strategy over a more extended period, such as several months or years.
  3. Market conditions: It’s essential to test your strategy across various market conditions, including trending, ranging, and volatile markets. This will help you understand how your strategy performs under different circumstances and make necessary adjustments.
  4. Consistency: Ensure that you test your strategy consistently, sticking to the same rules and parameters during the testing period. Changing your strategy mid-test can lead to unreliable results.
  5. Performance metrics: Monitor key performance metrics, such as win rate, risk-reward ratio, and drawdown, during the testing period. This will help you assess whether the strategy meets your expectations and risk tolerance.

There is no single answer to the question of how long you should test a trading strategy.

The key is to have a big enough sample size and test it in different kinds of market conditions to get a full picture of how it performs.

Be ready to change and improve your strategy based on the results of your tests, and remember that past performance is no guarantee of future performance.

#26

Give yourself 6-12 months of using that trading system.

First 3 months or Q1, spend that on back testing, forward testing and live demo trading.

Back Testing - theory
Forward Testing - Using trading simulators to get the feel of placing a trade
Demo - trading live using a demo account

Q2 or the following three months, trade a small live account, or a prop firm.

Put your system to the test, see if you can double that small account within 1 month. Prop firms, see if using your system can pass you prop firm challenges.

This will be enough time for you to collect results, reflect on the progress and see where you’re heading with the system and if you should continue using it or not.

Use this data as information to tell you what went wrong, what went right.

Don’t worry about market conditions, in fact this is great if the market is not good condition because you get to see how your system behaves and how you can adapt to the market conditions.

Don’t dwell on hearing too many opinions as that could cloud your judgement, if you can close the thread before it gets out of hand.