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LUCKILY THE TEST TACTIC SUSTAINEDIT TOOK MONTHS OF PREPARATION. A LITTLE OVER A YEAR AGO... NOTICED VERY PECULIAR PATTERNS ON A LOT OF VERY STURDY CHARTS. EXAMINED NEARLY 400 TICKERS... SOMETHING VERY IMPORTANT STOOD OUT. DID SOME CALCULATIONS AND TESTED THE THEORY WITH A LIVE PORTFOLIO. WHEN THE BANKING CRISIS STARTED PACKING IN, THE PORTFOLIO WAS RED AT FIRST. THEN EVERYTHING WENT GREEN... AND STAYED GREEN. LIKE M A G I C. THE BANKING CRISIS WAS PERFECT FOR THIS PORTFOLIO TYPE. VERY TUNED IN. EVERYTHING WORKED JUST AS PLANNED. THERE ARE PLENTY MORE TO GO... WILL TEST OUT THE LONGEVITY NOW. WE ARE IN A CYCLE AND IT'S CLEAR AS DAY. Strange things can and will happen. The performance of our markets are extraordinarily fascinating! Watched the market throughout the 2020 fallout... iT was nothing short of miraculous. We are all lucky. Count your blessings. Take care. P.S. Let's not get too excited. We have work to do!
NASDAQ:CG
by NebulousMercuria
Does 10 Minutes Per Month Beat Buy and Hold?So far, I’ve been testing day trading strategies. Which you’d have to watch for hours per day for trading signals. Or automate. And after all that dang work, not one of them beat buy and hold. Ouch. Recently, I found a strategy claiming to beat buy and hold, without any of that hassle. They say you can run it manually and in only 10 minutes per month. Too good to be true? Let’s find out… Our Test The rules are so simple, you might chuckle… Ignore all S&P 500 price action for the whole month, until the close on the last day. If that closing price is above the 200-day moving average, go long (or stay long if you’re already in a trade). If it’s below the 200-day moving average, sell (or don’t get in if you’re on the sidelines). With that in mind, let’s look at our setup a little more closely… The Trading Truth Test Setup Since this is a monthly strategy, I used much more data than in previous tests… Market: the S&P 500 index (using SPY to trade it, assuming SPY existed decades ago and is exactly 1/10th the S&P 500 Index price) Timeframe: September, 1941 to April, 2023 Bar interval: 1 day (for the moving average, even though we’re only making trading decisions at the end of each month) Moving averages: 200-day exponential moving average Starting Equity: $ 25,000 Max % of Equity Per Trade: 100% (just like we would with buy and hold, we’re fully investing our capital) Commissions, fees and taxes. To keep things super simple, we’re assuming these are all zero. The Test Results The test ended up 152.4x to $ 3.81 million a 59% win rate. Pretty amazing, though that’s over several decades. The maximum losing streak was $ 46,384.74, or 18.4% (from $ 252,545.60). That said, the buy-and-hold return was up 403.0x, trouncing our test. Especially given the tax advantages from long-term capital gains. Note: I did this analysis in a spreadsheet, with exported TradingView data. If you see any errors, please let me know. What Test Tweaks We Could Make One tweak is looking at the slope of the 200-day moving average. If it’s not pointing up enough, I wouldn’t want to go long. We could also use some other indicators to see when a pullback is likely, for example, Bollinger Bands or Keltner channels. What would you test? And what else would you like to see tested? Comment below!
SP:SPX
by TradingTruthseeker
Testing a Youtube MACD StrategyIn previous articles, I’ve tested moving average crossovers and bounces. But I didn’t test this famous (or infamous?) indicator related to them… The MACD. When I saw a video from TradingLab on Youtube called “BEST MACD Strategy,” I was curious to test his approach. What’s a MACD Daddy-o? It stands for Moving Averages Convergence Divergence. It’s meant to help us see momentum in the market. So we take a shorter-duration moving average and pair it up with a longer one. We then graph the difference between the two as its own line. We also plot an MA of the difference, called the “signal” line. When the signal line crosses over the difference line, we might be seeing a shift in direction. The farther the signal line pushes away from the other, the stronger the momentum is in that direction. Note: most charting software, including TradingView, also shows the difference as bars (a histogram). So how are we gonna test this thing? The Trading Truth Test Setup We’re keeping the market and the test period the same as some of the previous tests, for easier comparison. (The TradingLab video just says MACD works in many markets and timeframes, without limiting it to one for testing.) Market: the S&P 500 index (using SPY to trade it, assuming SPY is exactly 1/10th the S&P 500 Index price) Timeframe: Jan 2, 2008 to March 28, 2023 Bar interval: 1 hour Moving averages: Unlike previous tests, where we used simple moving averages, we’re using exponential moving average here to weight recent prices more. We use a 200 exponential moving average for overall trend direction. For the MACD, we’re using the classic 12 bars and 26 bars to see the difference between them. And we’re the normal 9-bar MA of that difference as the signal line. Starting Equity: $ 25,000 Max % of Equity Per Trade: 3% Commissions, fees and taxes. To keep things super simple, we’re assuming these are all zero. Our Test When we get a MACD crossover between the signal line and the difference line, we look to go long. But we only go long if: the last closing price is above the 200 MA, and When an upside MACD crossover (the signal line crossing up through the difference line) happens below its zero line (the lower half of the plotted indicator area). We do the opposite to go short… We short when price closes below the 200 MA and we get a downside MACD crossover above the zero line. Our stop loss is 1 penny past the 200 MA value when entering the trade. And our take-profit price is the difference between the entry price and the 200 MA (on entry) multiplied by 1.5. That’s the suggestion in the TradingLab video. Note: The Youtube video suggests using support and resistance as another filter to avoid choppy markets. But there aren’t clear rules given, so I didn’t do that. The Test Results The test ended at $ 30,401.39, up 21.6% with a 46.9% win rate. The biggest loss from the initial $ 25,000 deposit was $ 270.85, a 1.1% loss. The maximum losing streak was $ 800.22 or 3.0% (from $ 26,908.66). That said, the buy-and-hold return was 173.1%. Quite a reward for sitting on your hands, especially given the tax advantages from long-term capital gains. Note: I did this analysis in a spreadsheet, with exported TradingView data. If you see any errors, please let me know. What Test Tweaks We Could Make We could identify rules on when to stay out of the market. MACD strategies, like many, get chopped up in sideways price action. Some other MACD settings might also be interesting to test. We used only the most common settings here. What would you test? And what else would you like to see tested? Comment below!
SP:SPX
by TradingTruthseeker
2
Are Keltner Channel Bounces Worth Trading?Since I tested Bollinger Bands in the last article , what’s natural to think of testing next? Rubber bands? Rock bands? No, you silly goose! Keltner Channels… What’s the Difference Between Keltner Channels and Bollinger Bands? Bollinger Bands are based on chunks (called “standard deviations”) away from an average. Keltner Channel bands are based on multiples of the average true range (ATR) away from the average. Alrighty then. Let’s get into our test setup… The Trading Truth Test Setup We’re keeping this the same as our Bollinger Bands test, except for the ATR period. Since we’re using ATR to determine the Keltner Channels, we’re going with the same period as the moving average. Market: the S&P 500 index (using SPY to trade it, assuming SPY is exactly 1/10th the S&P 500 Index price) Timeframe: Jan 2, 2008 to March 28, 2023 Bar interval: 1 hour Moving averages: 50 bars (simple moving averages, meaning every bar gets equal weight, unlike with exponential) Average true range: 50 bars Starting Equity: $ 25,000 Max % of Equity Per Trade: 3% Commissions, fees and taxes. To keep things super simple, we’re assuming these are all zero. Our 2 Tests Test A: We’re using Keltner Channel bands 2 ATRs away from the moving average. Any time a high pierces the upper Keltner band and then a high is below the band, go short (if we’re not already in a trade). Any time a low pierces the lower Keltner band and then a low is above the band, go short (if we’re not already in a trade). This way, we’re waiting for a cross back over the band after it gets pierced. We didn’t do this for our Bollinger Bands tests, which makes this not a direct performance comparison. Test B: The same as Test A, except we’ll use Keltner bands 3 ATRs away from the MA instead of 2. The Test Results Test A's equity ended at $ 38,137.63, up 52.6%. The biggest loss from the initial $ 25,000 deposit was $ 843.16, a 3.4% loss. The maximum losing streak was $ 1,805.75 or 6.36%. Test B's equity ended with $ 34,435.71, up 37.7%. The biggest loss from the initial $ 25,000 deposit was $ 3,027.42, a 12.1% loss. The maximum losing streak was $ 2,080.71 or 8.22%. The worse results 3 ATRs away from the MA is surprising. Seems like that’d give us higher-quality trades. Even Test A’s numbers don’t come close to what plain-Jane buy and hold did: ending up 173.1%. Note: I did this analysis in a spreadsheet, with exported TradingView data. If you see any errors, please let me know. What Test Tweaks We Could Make Some traders wait for when Bollinger Bands or Keltner Channels get pinched (narrower in width). That’d be interesting to test vs bounces. One well-known trader, John Carter, looks for when Bollinger Bands go inside (“squeeze into”) Keltner Channels. He sees that as an indicator of bigger-than-normal moves. What would you test? And what else would you like to see tested? Comment below!
SP:SPX
by TradingTruthseeker
6
Testing a Famous Indicator 2 (& 3) Steps Beyond Moving AveragesSince trading is all about having a statistical edge (well, if you wanna make a living at it)... How about we use an indicator with deeper insight than averages? It’s called the Bollinger Band, and it’s what we’re testing today. What the Heck Is a Bollinger Band? Without getting all mathy on you (the formula is gnarly), imagine slicing up a regular bell curve in sections. The middle section (first standard deviation) has about 68% of the data. A broader chunk (2 standard deviations, which includes the first) has about 95%. And the widest chunk (3 standard deviations, including the first 2) has 99.7% Whenever price pierces one of the bands, we look to take a trade. We’ll test this in 3 ways, which we’ll dig into after laying out our basic setup… The Trading Truth Test Setup Market: the S&P 500 index (using SPY to trade it, assuming SPY is exactly 1/10th the S&P 500 Index price) Timeframe: Jan 2, 2008 to March 28, 2023 Bar interval: 1 hour Moving averages: 50 bars (simple moving averages, meaning every bar gets equal weight, unlike with exponential) Starting Equity: $25,000 Max % of Equity Per Trade: 3% Commissions, fees and taxes. To keep things super simple, we’re assuming these are all zero. Our 3 Tests Test A: Any time a high pierces the upper band 2 standard deviations away, go short (if we’re not already in a trade). Any time a low pierces the upper band 2 standard deviations below, go long (if we’re not already in a trade). Take profits and losses 2 average true ranges (ATRs) away from the previous close. Test B: The same as Test A, except we’ll use 3 standard deviations, instead of 2. Test C: Any time a high pierces the 3-standard-deviations upper band, exit a long position and go short. Any time a low pierces the 3-standard-deviations lower band, exit a short position and go long. We’re not using ATRs to take profits and losses on this one. The Test Results Test A ended down at $20,810.61, down 16.8%. From equity high to equity low, this strategy had a 19.0% drawdown. Test B ended with $22,818.73. So, we lost 8.7%, with a 9.2% peak-to-trough drawdown. Waiting for price to pierce 3 standard deviations helped reduce our loss. Test C ended with $25,127.75, a 0.5% gain, with a 15.1% equity high-to-low drawdown. But but but… buy and hold once again came out the winner by far, up 173.1%. Note: I did this analysis in a spreadsheet, with exported TradingView data. If you see any errors, please let me know. What Test Tweaks We Could Make For Tests A and B, I’d be curious to test waiting for at least a 1-bar price reversal after a Bollinger Band is pierced. That way, we’d have some momentum back in the trade direction before jumping in. Test C seems to show this, since we only exit trades when a band gets pierced going in the opposite direction. Still, the results are basically breakeven, so some other rule(s) may help there. What would you test? And what else would you like to see tested? Comment below!
SP:SPX
by TradingTruthseeker
Which Moving Average Strategy Crushes MA Crossovers? This...If you read last week’s article, you saw results for the famous (or infamous!) moving average crossover. It bombed vs buy and hold over the last 10 years, even when using take-profit and stop-loss levels. So, how do moving average bounces perform with the same exit levels? That’s what we’re testing today… The Trading Truth Test Setup Our setup is the same as last time, except we just need one moving average. Market: the S&P 500 index (using SPY to trade it) Timeframe: Jan 1, 2013 to January 31, 2023 Bar interval: 30 minutes. Moving averages: 50 bars (simple moving averages, meaning every bar gets equal weight, unlike with exponential) Starting Equity: $25,000 Max % of Equity Per Trade: 3% Commissions, fees and taxes. To keep things super simple, we’re again assuming these are all zero. How Is “Bounce” Defined? Traders look for ricochets off moving averages in a bajillion ways. Let’s be real: most just eyeball charts without real rules. That won’t work for rigorous renegades like us, though. :-) So, for Test A, here’s how we defined a bounce when price is above the MA: A price bar’s low is above the moving average The next price bar’s low touches or pierces the MA for one bar. (A close below the MA is ok.) The bar touching or piercing the MA can’t go more than 0.5% below the MA The next bar’s low must again be above the MA. Flip these rules for a bounce when price is below the MA. I know, I know… many bounces don’t happen until 2 bars (sometimes more) hover on or below the MA. We're keeping the criteria here simple. We define Test B the same way, except with an extra filter: The 50-bar MA needs to be sloping up at least 0.5% over the last 25 bars for long trades (and -0.5% or less for short trades). Alrighty, now, let’s check out the results… The Test Results Like with the MA crossovers test before, let’s first look at how plain ol’ buy and hold did over the same period. If you parked your cash in the S&P 500, your money would be worth 2.9 times as much by the end. Pretty good. So how did Test A do? The ending equity after 10 years was $40,112.74, 1.6 times your money with 24.27% max drawdown. Test B, in which we only took trades if the MA was sloping (trending) enough, we ended with $43,149.00, for a 1.7x return with only 17.75% max drawdown. That makes the return on risk much better than Test A. Yet, while these returns beat the pants off of our MA crossover tests, boring old buy and hold still whooped them both. What Would You Change About This Bounce Strategy? Trade a different market? Longer or shorter time frame? Tweak how a bounce is defined? Comment below to share. Also, please let me know: what else do you want to see tested?
SP:SPX
by TradingTruthseeker
Trading Truth Test: Do MA Crossovers Really Work?If you’ve ever sat up late at night watching tv, you may have seen an infomercial for software to become a day trader. They make trading sound so simple. Buy when a green arrow appears on the chart. Sell when a red arrow pops up. You’re snickering right now because you already know it doesn’t work. Yet so many traders talk about moving average (MA) crossovers in a similar way. Put a shorter time period MA (like 21 bars) on a chart and wait for it to cross above longer one (say, 50 bars) to buy. Do the opposite to sell. So how well does it really work? Let’s jump in and find out… Testing the Fabled Moving Average Crossover My 21/50 moving average crossover example above is a semi-common one people use. Of course there are others, like the 5/8, the 8/13 and the 13/21. 5, 8, 13 and 21 are all Fibonacci numbers, so people believe they have special powers. That’s probably a self-fulfilling prophecy since so many people use them. But that’s a test for another day. On to the rules!... The Trading Truth Test Setup Market: the S&P 500 index (using SPY to trade it) Timeframe: Jan 1, 2013 to January 31, 2023 Bar interval: 30 minutes. I chose 30-minute bars instead of the 2-minute or 5-minute bars many day traders use, just to smooth trends more. The less we can get caught in chops, the better. Moving averages: 21 and 50 bars (simple moving averages, meaning every gets equal weight, unlike with exponential) Starting Equity: $25,000 Max % of Equity Per Trade: 3% Commissions, fees and taxes. To keep things super simple, we’ll assume these are all zero. That’s borderline-realistic if you’re trading in a retirement account with a broker not charging commissions (you’d still have to pay exchange fees). The A/B Test Rules Rules for Test A This is the classic moving average crossing strategy. Whenever the 21 MA crosses above the 50 MA, buy. And every time the 21 MA crosses below the 50 MA, sell. That means, we exit whatever trade we’re in when we get the opposite signal… and then jump in going the other direction. Easy fo sheezy. Rules for Test B Everything is the same here, except for when we’ll take profits and losses. For this bad boy, we’re gonna use the 21-bar average true range (ATR) as both a trailing stop-loss and a trailing take-profit. Specifically, we’re using twice the 21-bar ATR (based on the previous bar’s closing price) for extra wiggle room. If we’re still in a trade when we get a new entry signal (MA crossover), we don’t take the trade. ‘Cause we’re rebels like that. One other quirk for Test B: if we hit a take-profit level in the same bar as a stop-loss target, I assumed we took the profit first. It didn’t make much difference overall, as we’ll see… The Test Results Before we see how Test A did vs Test B, the real baseline is just ye ol’ Buy and Hold. If you plunked your money into the S&P 500, your money would be worth 2.86 times as much by the end. Not bad for doing nada. So how did Test A do? No bueno. The ending equity after 10 years was only $25,091.74, which is barely breakeven. The one bright spot is the max drawdown, at 5.0%. It’s not hugely surprising, since MA crossover strategies are highly prone to losses when the market is chopping around instead of trending. And the market sloshes around way more than it trends. This pure strategy (only exiting a position on the next crossover) also tends to give back most profits, since it waits so long to exit. Given the take-profit targets and trailing stop-losses in Test B, how did we fare there? We ended with $27,261.39, a 9.0% return. Definitely better, especially given the 1.9% max drawdown, but nowhere near as good as buying and holding — especially when you factor in all the trading you’d have to do. What to Test Next Using some kind of trend indicator, like Super Trend or Linear Regression, to filter entry signals could help reduce losses. Picking a different market might also get us better results. For example, I saw someone on Youtube say the EUR-GBP forex market works well for MA crosses. Testing longer-period moving averages would also smooth the price action more and be less likely to cross as much in ranges.
SP:SPX
by TradingTruthseeker
2
Microstructural phenomenons: pre-testOn the chart, Oct '94 is a pre-test of 92.26 I'm not sure it's a good example here, but it'll suffice to explain this easy concept. Again, it's not the system's behavior principle, the reason of this microstructural phenomenon is all of us. Forgot to mention before... There's no such thing as, "A new wave started after "almost" hitting a level". NO. In 100% cases, a level should always be touched. because cheap/expansive is always 1 tick past the level, the main responsive activity will be concentrated after the level, never before. However, some of us sometimes gets a lil heavy handed in scaling in/scaling out of the previously acquired position. That's why prices start to react (sometimes quite strong) in front of the level. The main things to learn from here: 1) Pre-tests are not the systemic events, if you're responding at a level / a lil deeper past the level, nothing had changed for you at this points; 2) If you started to scale in before the level and got caught in a pre-test, just simply close your position with whatever revenue this pre-test offers a lil bit later and start scaling in again like nothing happened; Caution: pre-tests are also a part of the recorded market activity as everything else, during which the things may change or may not change. Pre-tests should be taken out of the context and be processed as independent entities.
GEducation
by gorx1
STEP 1 to MASTER TRADING: Hindsight trading. Train your eyes.A common mistake that traders make after learning any kind of trading setup is jumping into backtesting using a replay tool, or even live trading. However, if you think about it, trading is very much about pattern recognition. And when you force yourself into live trading without a proper understanding of what your patterns look like, most likely you’ll need much more time to succeed. A different approach and much more effective would be using hindsight, that’s when you see what actually happened. During this process, try to find at least 50 high-quality setups, that represent your trading system. So you actually see everything that happened and find situations, where your edge played out, document it in your journal. That’s great training for your eyes and brain. You don’t need to guess, you will not feel anything, because you already see what happened, you’ll notice that sometimes your edge, your system doesn’t give you entries and price goes without you, sometimes, you’ll see a loser or a breakeven after your entry, start to get used to this, as it’s all part of your system. After that, you'll have a much better understanding and vision for your setup - and that could be the time to try some backtesting and forwardtesting. I’ll talk more about a different kind of backtesting in future posts. Meanwhile, take care, send your questions, and comments, will be glad to chat with you. Dima
Education
by Yelli_trades
1
A story that ends poorly.... BLR hit the scene on a super pump play some time ago...the CEO.ca board was filled with hopefuls and the CEO flogged their "test kit" story. They did a deep disgusting split that provided some folks hope. I'm not an expert but everytime something does a reverse 25-1...it's best to step away. It went from test kits to weed from weed to baked goods with weed in them and from baked goods in the super fancy baked goods oven...to nearly pre split pricing with no sign of life in any of the irons they have in the fires. Peace out...I predict this storybook won't be reopened for some time
CSE:BLR
by Honkytime
Top & Bottom Indicator with KDJ ConfirmationSimple Top & Bottom Indicator with confluence of the KDJ Indicator! Long Entry Example: -Background Switched from red to blue -Buy Label Printed -KDJ close above 50 Short Entry Example -Background Switched from blue to red -Sell Label Printed -KDJ close below 50 SL Placement: -Last Bullish/Bearish Candle of previous opposite chart background. Risk to Reward: 1:2 (recommended) 1.1.5 (higher Winrate) I coded it into a Strategy. Suitable for the 1min Chart.
Long
by EtherMatt
2
The basics of back-testing (HOW TO)Hey Traders, Today I wanted to follow on from the fantastic amount of comments that we are receiving from the previous video, "stop strategy jumping." It seems that so many of you took a whole heap of value from that video and for that I am very thankful and to everyone who reached out and told their story or let me know that it really touched them. As highly requested, I wanted to run through a basic way to start getting the grips with strategy back-testing. How can we go about back-testing our strategies to ensure that they are profitable for us in the long run? Take a look, have a listen and tune in. Set up an excel sheet the way I do and get back testing. There's only one way to do this, and it is to do the hard work. Let me know what you guys find. I can go more in depth in the future, but for now. It seems like most people wanted to get to grips with the absolute basics, which is what I'm going to show you today. If you have any questions at all, please the comment section is the place to be. As always, have a fantastic trading week and a fantastic weekend traders. I'll see you very soon.
Education
by the5erstrading
12