Page created on: 2023.10.05
Last updated: 2024.12.05

“Financial Instruments Trader”
Image extraction: Firefly

About backtests

The direct reason for posting the backtesting results on the website is to digitalize the backtesting work and store it.

By doing so, everything is organized and streamlined, and even if the backtest has been completed once, additional backtest can be easily conducted if necessary.

The process is tedious and slow to progress, but I plan to upload it little by little when I find some free time.

Btw, the backtesting is conducted with manual trading in mind, not for so-called system trading, meaning automated trading using programs or similar tools.

For instance, certain aspects, such as how recent highs (or lows) are broken, require visual inspection. At the moment, I neither have the technical skills nor the intention to translate these elements into scripts.

Backtesting method

The basis for taking positions is used as the method, and it is verified separately for each.

The more samples (number of backtests) there are, the more accurate the results will be, so the more the better. However, if over 100 cases can be backtested, the usability of the method will become somewhat clear.

It is said that over 300 cases need to be backtested for actual use, but that number is reached by adding more as needed, and those that seem usable actually reach that number.

Additionally, the order of backtests is set from the most recent to the past. When adding new backtests to past ones, they are also added in chronological order.

Exclusion of asset growth rate

It might be better to include the asset growth rate based on profit/loss to measure it more accurately during the backtesting process.

However, I personally think it’s enough if I can roughly determine the simple pips gained, so I’m just adding and subtracting the results.

Maximum drawdown is substituted by frequency

It’s necessary to understand how long losses might continue and how much loss might be incurred for each method, so I am recording this.

Almost all backtests fix the stop-loss at -20 pips, so it is counted by frequency instead of percentage, although it is usually calculated as a percentage.

Ultimately, as long as I roughly understand the Profit Factor (PF) and maximum drawdown (loss, duration), I keep the process as simple as possible to make it easier to continue.

By the way, if the actual trade exceeds the maximum consecutive number determined by maximum drawdown, the use of that method is stopped. The results are then reviewed for reconsideration.

Tradeable Time in Europe

For potentially useful strategies, the tradeable time in Europe (Tradeable time) is calculated when the Profit Factor (PF) is generally 3 or higher.

This is because I live in the European time zone (UTC+1), but this figure is ultimately just a guideline. Even within the designated trading hours, it’s entirely normal to miss opportunities or make mistakes.

That said, it is undoubtedly a closer approximation to the actual number of trade opportunities. The number of trades per month serves as a particularly useful benchmark.

Even if mistakes are scattered throughout

There might be errors in judgment, oversights, misunderstandings, and calculation mistakes within the result data. In fact, there definitely are.

This is derived from my own rough personality, and there’s nothing I can do about it. Especially now that I’ve become an old man.

Still, as long as it works for now, I consider it acceptable.

I have no choice but to close my eyes to the details and move forward. That’s all one can expect from me.

The meaning of viewing others’ backtesting results

I’ve thought about the meaning of one person viewing another person’s backtesting results, but it seems quite pointless. It’s odd to say this while posting it on a blog.

However, for those not familiar with trading, it might provide hints for trading points.

But even then, one must verify for oneself before actually trading.

The reason it’s important to “verify for oneself” and why viewing others’ backtesting results is pointless is because, can you expose your funds to the market based on information received from someone else?

If the basis for taking trading positions relies on others, it’s clear that it won’t last in the long run.

Unless one is a trading genius whose cells react to price movements, without trading based on data compiled through one’s own time and effort, there’s no place to fall back to when losses continue. That means not knowing the acceptable range of drawdown.

When losses continue, it’s typical to regain one’s rhythm while reflecting on one’s trading experience, but for a trader who has established their style through repeated backtestings, actions can be based on numerical backing. This is extremely important for individual day trading.

Therefore, the backtesting results page is quite purely just personal stock.

As mentioned before, it might provide hints to some.