The title looks catchy, but let’s hear me before rejecting.
So here is the strategy.
Pick any trading strategy, be it based on indicators, or straddles or anything else.
Make fixed rules for entry exit.
Now just test your strategy for past 1 year data, and always include 2% slippage to account for transaction charges/ brokerage. Also see drawdown for past 1 year.
If it gives profit, you are good to go. This is really simple.
Most people who suffer losses are the ones who never tested on data.
Data backed strategy will always work.
Isn’t it better than not checking past performance at all? It is more probabilistic to be right. This is the fundamental things every profitable hedge funds use. That’s how you make strategies, based on past performance.
1y data might be not enough, it will certainly underestimate risk.
But overall agree with you.
And yes backtesting can work if one uses common sense. I have multiple systems making money this way.
But also accept uncertainty, even if we do everything right - markets can change behavior and system can stop working. Hasn’t happened to me yet, but it does happen.
Is this applicable for both Option buying and selling or only selling?
I lost 54L doing Option buying without any risk management, no proper entry-exit rules, and just kept averaging when trades went against me. I was a mess!
Now I want to focus on learning before I trade again. Any suggestions from you are much much helpful for me @Mayank_Agrawal2
I learnt from this guy - but there is no ready made system and he does not trade in India so we have to adapt. We anyway cant copy someone else easily. Best to create your own style after learning from others.
Strongly recommend you to trade very small Focus on paying your debt, ( i used to trade with 1 qty SBIN for some time).
If you are serious, assume you will lose money for 3+ years, so trade with small capital until you have proof that you can make money and then scale up in steps. Never double up / average in order to recover losses. It took me 5+ years to turn profitable, some may get there earlier, some will never be able to do it. Good luck.
1y data is taken because I trade in options. Market can change behavior, so it will get captured in last 1y. If we take more data, it is also possible that we may be having a strategy that used to work on old market conditions, but don’t work now.
I took 3-4 year data to get strategy. I use 1 year data for parameters like SL, entry time etc
no strategy is needed. just put your money in an uptrend stock thats it. thats all there is. just like bhagavatam is the essence of all vedic literatures, this is the complete essence of making money in stock market.
I totally agree with you on this. and i also backtest my strategy with 5+ years of data on Algotest then only go with it in live. btw what strategy you are trading and what platform do you use for backtesting
Very true, backtesting is very important. Not many even have the idea of deep backtesting feature on tradingview. I was a trader who was in loss as well, but my fortunes changed after exploring deep backtesting feature and testing multiple strategies on it. For example, this is the result for a positional strategy I use in Nifty :
This is backtesting result on Nifty charts for the past 16 years for my positional strategy. The equity curve is stable and the drawdown parameter shows us how to do position sizing. This builds confidence while trading rather than backtesting for a year or two or not backtesting at all.
There were experiments conducted where trades taken randomly at random times, just maintaing RR, and you will be amazed that results were profitable! What really matters is RR and right psychology, analysis, not a big deal.
I have and no it doesn’t work. RR gives no edge on its own, win rate will automatically adjust and make net somewhere close to 0 once there is enough sample size ( or perhaps to underlying returns depending on what you are doing).
And cost and slippages will make this negative. Psychology wont do shit without edge.
I test and use whatever works best. In intraday, we dont have much room for variations because of high execution costs. Maybe not true for options which i dont trade yet.
I don’t remember R:R numbers and that is basically decided by the market as good times will give better numbers and bad times will give worse ( i don’t use targets).
Win rates are more stable, one system is around 35%+ and other is around 50%. RR and win rate are both things that i dont really care for much. Probably best not to have too extreme % .
That’s good enough win rate, but it looks confusing are you systemic trader or discretionary trader, i think you overlap the two, and what’s the monthly return on capital you aim for?
