Forward Test Update
The forward test is up $182K since the beginning of the 2024.
Important: There is no guarantee that these strategies will have the same performance in the future. I use backtests to compare historical strategy performance. Backtests are based on historical data, not real-time data so the results shared are hypothetical, not real. There are no guarantees that this performance will continue in the future. Trading futures is extremely risky. If you trade futures live, be prepared to lose your entire account. I recommend using these strategies in simulated trading until you/we find the holy grail of trade strategy.
Housekeeping:
ATS is changing. To read more about the change, click here.
Analysis Paralysis
By far the most common question I get is:
Which automated trading strategy is the best?
My standard answer to anyone asking the question is: how do you define ‘best’?
The answer to this question is never the same and can change along the journey. So if you haven’t done so already, the best way to answer this question is to create your own forward test. It takes some effort, but it’s the best thing you can do to leapfrog a year or two of the hunt. To read more about how to create your own forward test, click here.
Once you create your forward test, then you want to use certain metrics to help select the best strategies to use. It’s not hard. What’s hard is losing your entire account because you didn’t do your homework.
The second part of the question is:
Which metrics do I use to analyze the forward test?
Net profit is good, but doesn’t tell you anything about risk or return. I tend to like strategies with a low MAE (Max Adverse Excursion) and average trade time. I also like to look at efficiency ratios and cumulative drawdown.
You can go into analysis paralysis with these things, so keep it simple. Focus on the obvious. The:
first cut is simply those strategies with a net profit greater than $0.
second cut is strategies with at least $100 earnings per trade.
Then, I look at a host of different factors to “value” strategies. Subscribers can look at an example framework for valuing strategies at the end of this post.
Today, I’m going to show you the results of my own forward test. Specifically, I’m going to show you:
The net profit of all strategies in the forward test
Strategies with a net profit greater than $0
Top 3 strategies in the forward test based on earnings per trade
First, I want to step back for a quick overview of how we got here.
The ATS Forward Test
ATS started with a simple nine strategy backtest published in January of 2021. Those initial backtests led to the development of better strategies that were used to create the ATS Forward Test. The forward test is based on live data rather than historical data. So, the forward test takes longer to run because it’s in real-time, but the results are more reliable. That does not mean that the forward test is indicative of future results, only that it is a better model of how a strategy performs over the test period.
The forward test I’m about to share with you was created from the Q1 2024 Backtest. It shows forward test results for the last three months:
The first chart shows all strategies in the forward test that have taken a trade in the last 3 month. Total net profit is: $182K.
The second chart shows all strategies in the forward test with a net profit greater than $0. Total net profit is: $378K.
So, if you’re looking for a place to start, you’ll want to look at the second chart: