Trading System Very Profitable

Having found a profitable trading system that you have already tried, how can you be sure that this system will produce the same profits in the future?

No one can predict the future, your system can easily generate losses for years to come, or it may not be negotiable.

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There are some tests that you need to take before accepting a trading system, these tests will show how robust your system is, and by passing these tests you will be more likely to show profits in the future.

Test 1: make sure you set the liquidity rule, that your entry and exit prices are achievable.

Test 2: Take another look at your trading systems and your rules (this is very important).

I made a dozen commercial systems which showed excellent results, but upon closer examination it proved that I cannot follow them in real life.

Check for a stock that made a big profit, the system may not be profitable without this stock.

Test 3: change the simulation start date two or 3 times, if it still shows good results, then you have passed test 3.

Test 4: Change the values ​​of some parameters or variables that you have in the rules of your trading system, you have to change one value and then test, change another and then test …

If the results are not greatly affected, you passed test 4.

Test 5: Try to prevent the system from buying 20% ​​or more of the shares you previously bought by backtesting. Then run the test again. To pass this test, the system must show the same results as before.

Test 6: Stock chart should look good, check some statistical values ​​like sharpness index, rank index, standard deviation, maximum drawdown, average day for profit recovery …

It depends on the risk you are willing to take, but choose only systems that have: higher sharpening ratio, higher classification ratio, lower standard deviation, lower maximum reduction …

Exclude systems that have a very large maximum drawdown, one standard deviation, and an average day for profit recovery.

I think the most important factor is the average day for profit recovery.

It is the average number of days that you must wait until the value of your principal returns to the same level before the reduction occurs.

High values ​​will allow you to wait a long time before recovering profits and surely many traders will abandon their trading system, and that is the worst thing that can happen to a trader because right after that, the system will show excellent results. (That always happens)

These tests are very restrictive and perhaps you will reject all your trading systems, but when you trade you will put your money, real money, so I think you must be very selective to take advantage of all the possibilities.

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