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Backtesting


Once a trade system has been defined, the name of the system appears in the Add Study windows like any other study and can be displayed like any other study, using either a toolbar button or one of the Add Study windows.

The backtesting display appears as two windows: a top window showing the entry and exit points, and whether the individual trades are profitable, and a second window showing the amounts of the profits or losses for the system as a whole and giving various statistics related to the system.

81.Selecting Display Elements for the Backtesting Display


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Users can select from among several items to display in a Trade system window.



  1. Right-click in a Trade system window.

  2. Select Modify Study Parameters.

  3. This allows users to set Display, Enable and Time Range and Stats characteristics for a Trade System window.

82.Selecting Display Characteristics


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Selecting Display from the initial Setup Study Parameters window allows you to set display characteristics for the following:



Display Part

Function

Profit

Sets the colors for the total and closed profit lines.

Loss

Sets the colors for the total and closed loss lines.

Weight

Sets the thicknesses for the total and closed display lines.

Draw

Sets the elements that will appear in the display. Choices include:
Lines and Arrows, Arrows only, Lines only, or None.

Display

Sets the form for the total and closed displays. Choices include: Line or Histogram.

Trades

Accesses a second color window to select the colors for the trades in the system. (The arrows and the circles in the top pane).

Color

Allows you to select the colors for the system trades.

Entry Stop

Allows you to turn and off Entry Stop trades for this system.

Entry Limit

Allows you to turn and off Entry Limit trades for this system.

Exit Stop

Allows you to turn and off Exit Stop trades for this system.

Exit Limit

Allows you to turn and off Exit Limit trades for this system.

Stats

Turns on and off individual display elements showing statistics associated with the trade system.

Total Trade Count

Total number of buys and sells indicated by the system.

Open Position

Number of contracts long or short.

Percent Long

Percentage of the total trades that were long trades.

Average Duration

Average number of bars a trade is held.

Average Profit

Average gain for all trades.

Average Win

Average gain for all winning trades.

Average Loss

Average loss for all losing trades.

Maximum Win

Biggest winning trade.

Maximum Loss

Biggest losing trade.

Max Closed Draw

Biggest amount lost for any string of losing trades.

Max Draw Amount

Largest loss in equity during any time, i.e., the amount needed to trade the system.

Max Draw Duration

Largest number of bars form a peak to a trough

Max Consec Wins

Largest number of consecutive winning trades.

Cur Consec Wins

Current number of consecutive winning trades.

Max Consec Losses

Largest number of consecutive losing trades.

Cur Consec Losses

Current number of consecutive losing trades.

Profit to Max Draw

(Total Net Profit)/ (Maximum Draw Amount).

Profit Loss Ratio

(Total gain for open and closed trades)/(Total loss for open and closed trades).

Percent Winners

Percentage of profitable trades.

Remove To Neutral

How many of the most profitable trades would have to be removed to make the total profit zero. (Only relevant for profitable trade systems.)

Return Retrace

Average compounded return divided by the average maximum retracement (AMR), where the AMR equals the average of the maximum retracement for each point and the maximum retracement equals the larger of the: maximum retracement from a prior equity peak or the maximum retracement to a subsequent low.

Linear Regress

Applies a least squares linear regression line to the profit curve producing an average return, which is divided by the Standard Error.

Time Percentage

Shows the number of bars in any trade divided by the current number of bars, which is the percentage of time (in terms of number of bars) the trade system has been in the position.

Notes: Stat values are only displayed when the vertical cursor is active.
Total Net Profit and Closed Net Profit are automatically displayed.

83.Selecting the Enable Choice


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From the Enable section of the initial Setup Study Parameters window, select which trades to include in the bottom panel of the Backtesting/Trade system display. Choices include: All, Longs or Shorts.


84.To select the time range


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  1. Right-click the displayed study.

  2. Selecting Modify.

  3. Click the under Time Range to open the Define Bar Range window.

  4. Choose one of the three buttons in the From section, as described below.

  5. Select the top button in the from section for daily or longer bars.

  6. Click the drop down list button next to the date to display the Calendar and select the desired date.

  7. Input the desired time or select the second button for intraday bars.

  8. Input the desired number of bars to look back.

  9. Input the desired time (for intraday bars).

  10. Enter 00:00 to limit the time range to the current day or select the third button to start the bar range a specific number of days back.

  11. Input the number of days back to start the range.

  12. Click either the Current button in the To section or the button immediately below that to select a date and time to end the evaluation.

  13. Enter a date and time, if necessary (if the Current button has not been selected).

  14. Click the OK button to apply the selections and close the Define Bar Range window.

85.To select the stat characteristics


Users can elect to display certain elements on a per trade or per contract or share basis. Elements that display differently on a per contract or share basis are:

Total Trade Count

Percent Long

Average Duration

Average Profit

Average Win

Maximum Win

Average Loss

Maximum Loss



The remaining elements display the same whether per trade or per contract or share is selected.

86.Printing a Trade system's Specifications


Like other applications within ProductName|variable=ProductName, the Backtesting/Trade system feature has a special printing capability. Printing in the Backtesting/Trade system application allows users to print all the choices they made when setting up the selected trade system.

  1. Right-click the trade system to be printed.

  2. Select Send to.

  3. Select where the print should be sent.

  4. Choices include: Printer, File or Clipboard.

  5. Select Details, if desired.

  6. Selecting Details prints all the parameter names and values, rather than only the values.

87.Backtesting Display


Backtesting results can be displayed like any other study.




To display backtesting results for a Trade system


  1. Click the Study button.

  2. Click the Trade System tab.

  3. Select the Trade system to be displayed.

  4. Click the relevant Trade system button in the button column.

  5. Click the Add button.

  6. Click the Close button to close the Add Study window.

Elements of a Backtesting Display


Backtesting displays consist of two windows. One window shows the up and down arrows, dashed and solid horizontal lines and ovals indicating the trades specified by the system. There will be one set of these arrows, lines and ovals for each trade specified in the Trades for System section of Formula Builder for the relevant trade system.

The second display window indicates the success of the system over the designated bar range, giving various indicators of risk and profit.

The following table describes the meaning of each of the elements in the top window of the Backtesting display:

Element

Description

Red & blue dashed lines

Indicates losses are being incurred in the system.

Red & blue solid lines

Indicates profits are being made in the system.

Red & blue ovals

The end of the current buy or sell signal for the 2 systems.

Red & blue up arrows

Buy indicators for the 2 systems.

Red & blue down arrows

Sell indicators for the 2 systems.



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