Backtest, Forward Test, Live Trading – iSystems 5.18.2016
Posted By:- Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
1. Market Commentary
2. Futures Support and Resistance Levels – S&P, Nasdaq, Dow Jones, Russell 2000, Dollar Index
3. Commodities Support and Resistance Levels – Gold, Euro, Crude Oil, T-Bonds
4. Commodities Support and Resistance Levels – Corn, Wheat, Beans, Silver
5. Futures Economic Reports for Wednesday May 18, 2016
For 2016 I would like to wish all of you discipline and patience in your trading!
Backtest, Forward Test, Live Trading
Eureka! You’ve just found the holy grail of market indicators. The indicator of indicators which over the past few days has perfectly called each 30 minute top and low in the e-mini S&P futures… Now what? Time to put some real money on the thing and retire to the islands…. Not so fast!
Your strategy may be looking good over the past few days, or even months or years. But to really get comfortable with it, wouldn’t you rather know how it has done over many, many years. And once you’ve done that, wouldn’t you rather see it work for a period of time on the current market before putting real money to work.
If you answered yes to either of those, welcome to the world of trading systems – because backtesting and forward testing are two of the biggest advantages of trading systems. The ability to see what would have happened, and what is happening – BEFORE putting real money to work. And then, the kicker… tracking your live account versus the trading system to see how you’re doing with that live money once you’re ready to take that next step.
Becktesting is just what it sounds like. Observing how a system would have performed going ‘back’ in the past, using historical prices to see when a system would have gotten in and gotten out, bought and sold, been stopped out, and so forth. By running the system backwards in time, an investor can compile all the different trades and calculate how much the system would have made and lost month by month, year by year – and from there calculate the statistics such as annual return and maximum drawdown and volatility and so forth we all use to gauge a model’s abilities. On the iSystems platform, every model, every model is backtested as far back as possible, ranging from 2001 to 2007, and shows in the equity curve graph and monthly perf table with a white background.
(Disclaimer: Hypothetical Model Account Performance)
Putting it all together: Wouldn’t it be nice if you could put all of these – the back test, the forward test, and the live trading fills onto one composite track record – with the different fill environments highlighted different colors to quickly and easily see the differences on the equity curve chart. We sure thought that would be cool, and that’s exactly what the iSystems platform does. The iSystems platform creates one track record containing all three types of fills.
It uses the Live Trading results to calculate monthly returns for any month in which any client, at any firm, is trading the system for the entire month. If there’s no client trading it in real time, it uses the forward testing, what it calls the tracked fills, for those months in which there are no client fills that month, or for the entire month. Finally, iSystems uses backtested fills (what it calls computer generated fills) for those months occurring before the system was loaded onto the iSystems trade servers. The resulting track record and monthly results are hypothetical in that they represent returns in a model account. The model account rises or falls by the single contract profit and loss achieved by the system in whichever data set is available, and begins with the Suggested Capital listed, then is reset to that amount each month. The percentage returns shown reflect the inclusion of commissions, fees, slippage, and the cost of the system; giving what we believe to be the most complete view of system performance available.
Here’s a glimpse of what an equity curve looks like highlighting backtesting, forward testing, and live trading using the different shades of color for the ExePi21CrudeCL system.
Feel free to contact a commodity professional if you like to evaluate and learn more about the systems we offer by replying back to this email or visiting:
IMPORTANT RISK DISCLOSURE
You should fully understand the risks associated with trading futures, options on futures, commodity trading systems and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options on futures, Forex and commodity trading systems involves substantial risk of loss and is not suitable for all investors. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.
The returns for trading systems listed throughout this website are hypothetical in that they represent returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real-time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on backadjusted data (backadjusted).
The hypothetical model account begins with the initial capital level listed, and is reset to that amount each month. The percentage returns reflect inclusion of commissions, fees, slippage, and the cost of the system. The monthly cost of the system is subtracted from the net profit/loss prior to calculating the percentage return.
If and when a trading system has an open trade, the returns are marked to market on a daily basis, using the backadjusted data available on the day the computer backtest was performed for backtested trades, and the closing price of the then front month contract for real time and client fill trades. For a trade which spans months, therefore, the gain or loss for the month ending with an open trade is the marked to market gain or loss (the month end price minus the entry price, and vice versa for short trades).
The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investor’s participation (whether or not all signals are taken) in the specified system and money management techniques. Because of this, actual percentage gains/losses experienced by investors may be materially different than the percentage gains/losses as presented on this website.
Please read carefully the CFTC required disclaimer regarding hypothetical results below. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.
The information contained in the reports within this site is provided with the objective of “standarizing” trading systems account performance and is intended for informational purposes only. It should not be viewed as a solicitation for the referenced system or vendor. While the information and statistics within this website are believed to be complete and accurate, we cannot guarantee their completeness or accuracy. As past performance does not guarantee future results, these results may have no bearing on, and may not be indicative of, any individual returns realized through participation in this or any other investment.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
|Contract June 2016||SP500||Nasdaq100||Dow Jones||Mini Russell||Dollar Index|
|Contract||June Gold||July Silver||June Crude Oil||June Bonds||June Euro|
|Resistance 3||1300.1||17.74||49.98||167 5/32||1.1407|
|Resistance 2||1292.0||17.56||49.29||166 23/32||1.1382|
|Resistance 1||1286.3||17.42||48.91||166 7/32||1.1354|
|Support 1||1272.5||17.09||47.84||165 9/32||1.1301|
|Support 2||1264.4||16.91||47.15||164 27/32||1.1276|
|Support 3||1258.7||16.77||46.77||164 11/32||1.1248|
|Contract||July Corn||July Wheat||July Beans||July SoyMeal||June Nat Gas|
Average Earnings Index 3m/y
Claimant Count Change
Final CPI y/y
Final Core CPI y/y
German 10-y Bond Auction
CB Leading Index m/m
Crude Oil Inventories
FOMC Meeting Minutes
MPC Member Haldane Speaks