The Mudder Report 4.0: Forward Test Update

The forward test is evolving...

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.

---

We haven’t found the holy grail of automated trade strategy yet, but we get closer with every strategy. Click here for links to all strategy descriptions and the most recent performance chart from the backtest.

Edouard Manet 053, The Races at Longchamp, 1864, Art Institute of Chicago

The Mudder Report is Evolving

If I were to rank the reliability of strategy tests on the simulation it would be:

1. Live Forward Test

2. Simulated Forward Test

3. Market replay Simulation

4. High-order resolution Simulation

5. Standard Simulation

For more detail on each of these tests, please see this previous Mudder Report.

In general, the more reliable the test, the more time it takes to run. That’s the conundrum. In other words, accuracy takes time, but backtest risk decreases with accuracy. So there’s no way to get around it—the best way to test strategies before going live is with a forward test using live data on a dummy account.

How To Set Up & Manage Automated Trading Strategies On A Virtual Server With NT8

Once we get the forward test results, then what? Well, we can see if the strategies really are profitable or if the backtest was faulty in some way. This is a hard thing to test because there are so many possibilities. For example:

1. historical data may be corrupted

2. optimization model may be flawed

3. bar formation frequency may be wrong

After some preliminary research, we found some very interesting points of interest, including a possible arbitrage opportunity. If you’ve ever found one of these, then you know they are their own holy grail of sorts. I’ll tell you what I found and where to look to find it yourself. I’m also going to give you an update on the most recent forward test results as well as our election day strategy: Strategy 73. I’m also going to walk you through the best performing strategies in the forward test so far and tell you which three strategies we’re running live. At the end of the post I’ll share my personal daily chart with you (including points of support and resistance to look for) and illustrate how I think NQ might push above 17,000 by EOY.

Let’s get started…

The Forward Test

These are the results of the forward test. The trades are being made on a simulated account, so the results are still hypothetical, but the data driving the simulation is live. Note, this does not cover all weeks of the year. November 24 was the last day of the 47th week of 2023, and as of today we’ve captured 40 of those 47 weeks in the forward test. Also note that strategy variations vary by instrument, data series, parameter setting and contract size. The attached report provides the: 1) net profit, 2) instrument, and 3) start date for all strategies in the forward test.