The Mudder Report 2.0: 8/21/22 - 8/26/22

It's finally here: Real-time simulated testing

We are on the hunt for the holy grail of automated trade strategy. There are many hurdles in this hunt. Strategy development is just the first. Then, you have to test the strategy. Real-time testing is the best way to test a strategy, but it takes time and costs a lot of money, which is why traders use backtests as a way to test strategies without the loss of either, but backtests come with their own set of hurdles.

I’ve talked about the many things we’ve done to improve backtest accuracy — we’ve put a process in place that seeks to eliminate backtest risk by working within (instead of in ignorance of) the limitations of the backtest engine. Now, it’s time to start testing these strategies in real-time.

It All Started With Strategy 10

We first started testing strategies in real-time back in March of 2022. We decided to conduct a simulated live test of several strategies including Strategy 10. Strategy 10 was our star unicorn, and once again we were impaled. It was at that time that we shifted our attention to backtest accuracy. The good news is that we’ve created a process that greatly improves backtest accuracy, but there is no substitute for testing the strategy in real-time.

This is the next hurdle.

The chart below is our first pass at providing real-time results. In other words, these are actual results from a live, simulated account. Like the original Mudder Report, it focuses on one week of data, but that data is from trades made in real-time, not on a backtest engine. This is as close as we can get to knowing if our strategies are viable without running them live with real dollars, which is what we plan to do in January 2023.

Mudder Report 2.0: First Run

The chart below is just the beginning, but let’s talk about what it’s telling us.