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Thanks Dennis, those are some great examples -
Clearly the single-contract backtest does nothing to tell you what the real
runups and drawdowns are. That's bad enough. A worse problem happens when
people use this type of simulation to "develop" a system.
The trades in the past will not have nearly the weight that they should. So
most likely the system has been seriously mis-optimized. Try trading 20
times the contracts on some of those losers back in the 80s and your system
could crumble to dust before your very eyes!
speaking from experience,
phil
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