Analyzing Back Tests or Demo Accounts....
I use this as a simple way of gauging whether or not a strategy may or may not be successful in the open market under live and ever changing conditions.
You can see from the attachment below that I doubled a 50,000 account in a relatively short period of time. I have done this before but it is not the norm. The first things that I note was the largest winners versus the largest losers. Pretty close but the winner exceeds it. The winner was achieved from letting the position run for a long time. Measured in hours. The losses not so much. They accrued in relatively short periods of time and with using position leverage, which was starting at a base and then adding to the position as price moved against you.
There is data to suggest that averaging down is not a bad thing. However I don't recommend it with live trading. Not unless you are controlling the leverage which in most cases you cannot do unless you are using a larger account of 50K or more.
I don't really ever use back tests as this is hindsight from price action that has already happened. There is no proof that this is what would have happened if you executed the strategy in live conditions.
George Soros once said, "if you are day trading it is likely you are not making any money". He may have been correct in that assumption. Likely he has tried it or tried to see if it worked in the long run by live testing. He likely found that it did not.
Demo tests do allow you to test out your entries and executions along with some strategies in real time but the problem is fills. You may or may not get the fills in a live account the same way that you do in a demo. I would say that for the most part this is true. Especially in fast moving markets. For example say you try to execute 4 contracts at a certain price in the Emini SP. If the price is moving quickly you may on get one of those four filled. Now if you have been getting hit with 4 contract losses that is significant if you are filled at one contract even if the price moves in your favor.
That is simply one of the conundrums of demo versus live. The demo should imitate the live account but it never does. Price does not move the same it is that simple. Your slippage and entries always come into play. I suspect that most of the software that is designed for the people who pay for it (such as brokers, banks and other entities) is set up to drain your account into their over time. Through fees or movements of price along with fills you end up losing over time through no fault of your own other than trading conditions. They will tell you of course that this is not the case but I know it to be false.
It is very hard to find an honorable feed of data to execute on. No one like to pay out. It is that simple. If the software were being paid for by the traders or they designed their own they might do a lot better. However usually this is not an option or skill set most traders possess.
As I said I am very leery of the results I consistently get on a demo. It just isn't possible on a live account so one has to assess each situation and trade in a different manner. Conditions will inevitably dictate whether you will indeed be profitable or not. Cheers!
You can see from the attachment below that I doubled a 50,000 account in a relatively short period of time. I have done this before but it is not the norm. The first things that I note was the largest winners versus the largest losers. Pretty close but the winner exceeds it. The winner was achieved from letting the position run for a long time. Measured in hours. The losses not so much. They accrued in relatively short periods of time and with using position leverage, which was starting at a base and then adding to the position as price moved against you.
There is data to suggest that averaging down is not a bad thing. However I don't recommend it with live trading. Not unless you are controlling the leverage which in most cases you cannot do unless you are using a larger account of 50K or more.
I don't really ever use back tests as this is hindsight from price action that has already happened. There is no proof that this is what would have happened if you executed the strategy in live conditions.
George Soros once said, "if you are day trading it is likely you are not making any money". He may have been correct in that assumption. Likely he has tried it or tried to see if it worked in the long run by live testing. He likely found that it did not.
Demo tests do allow you to test out your entries and executions along with some strategies in real time but the problem is fills. You may or may not get the fills in a live account the same way that you do in a demo. I would say that for the most part this is true. Especially in fast moving markets. For example say you try to execute 4 contracts at a certain price in the Emini SP. If the price is moving quickly you may on get one of those four filled. Now if you have been getting hit with 4 contract losses that is significant if you are filled at one contract even if the price moves in your favor.
That is simply one of the conundrums of demo versus live. The demo should imitate the live account but it never does. Price does not move the same it is that simple. Your slippage and entries always come into play. I suspect that most of the software that is designed for the people who pay for it (such as brokers, banks and other entities) is set up to drain your account into their over time. Through fees or movements of price along with fills you end up losing over time through no fault of your own other than trading conditions. They will tell you of course that this is not the case but I know it to be false.
It is very hard to find an honorable feed of data to execute on. No one like to pay out. It is that simple. If the software were being paid for by the traders or they designed their own they might do a lot better. However usually this is not an option or skill set most traders possess.
As I said I am very leery of the results I consistently get on a demo. It just isn't possible on a live account so one has to assess each situation and trade in a different manner. Conditions will inevitably dictate whether you will indeed be profitable or not. Cheers!
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