Trend-Following Demo – 7 March 2012

(For demonstration purposes only. Not optimized for profitability. Trade at your own risk.)


Still no sell signals hit. Getting boring, huh? The money is in the waiting. I’m quite eager to see some of these positions trigger stops or exits, because I can already see some issues relating to backtesting popping up. There are certain issues that can have significant impact on backtests. Think about this: If the sell signal triggers, there may be a buy signal that also triggers during the same day, thus drawing the system back into the market, right? But what if, chronologically, the buy signal triggered first, then subsequently dove, and only at the close, or some other time later, did the sell signal trigger? The thing is, if one is not careful, certain impossible trades may be deemed possible by backtesting when in reality they are not. Another issue has to do with trading volumes. Do backtests sufficiently account for one’s trading size? As any large institutional fund manager knows, a large enough portfolio can make waves when entering or exiting market positions. Does one’s backtesting account for this slippage accurately enough? I would think, especially for huge accounts, it may not be accounted for enough. I would love to know how the pros adjust for this. I know there’s a term for this phenomenon. I just have to dig up some old stuff and look for it. Time for dinner.

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