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Is it OK to trade this system in coming months? I am tryinig to argue in favor of yes answer. But beware of possible drawdowns and change in Market conditions. Using approach discussed in this thread, it need to be rejected, at least incubation period should not give you warm and fuzzy feeling, even if it gives you good performance.
Can you help answer these questions from other members on NexusFi?
BTW, in a recent conversation with Mike Bryant, the author of MSA, he said:
One strength of MSA is its very in-depth position sizing options. It is not something I have played around with much only because of the complexity of implementing them into live strategies. Probably something I should spend more time on.
The position sizing alternatives are definitely nice to examine and think about. Of course, these can be optimized too, just like strategies, so caution is important here, too.
Week 4 of trading the NGEC system with actual money is now complete. Every 4 weeks or so, I will review the current performance of the system, and answer some standard questions. This information may be useful should the performance of the system become erratic - maybe there was something I could have seen earlier, or something I just plain out missed.
Summary: Well, after 4 weeks of trading this system live, I am right where I started - breakeven.
Am I surprised at this result? Absolutely not. It is well within expectations.
Am I disappointed in the results so far? Yes. Anytime I start a new strategy I want to make money at the beginning.
Are results in line with expectations? Yes. The current profit is below the average I expect, and it is above the lower 10% line. So, while it is underperforming currently, I see no reason for alarm. Also, I have had 2 winning weeks, and 2 losing weeks. Over time, I expect about 60% of my weeks to be profitable, so the performance is just as I expect.
Are fills and trades live comparable to Tradestation strategy report? Yes, in fact in most cases my fills are better than what I had anticipated. Slippage is usually less than I had expected.
Do I see any reason to stop trading this system? No.
Do I see any reason to change my position sizing plan, i.e. reduce or increase my risk? No.
Thank you Kevin. This has probably been one of the most helpful threads I have read yet. I now realize that I am made numerous errors in developing the system that I am currently trading live. I am not sure what to do at this point because although the system is profitable (+38% in 15 weeks) I corrupted my data by using my entire data set to backtest and optimize. This is a rookie mistake but now I am trying to think through how to determine if I should continue to trade this system.
On the one hand: the system is performing in line with the (now corrupted) historical backtesting results - has had drawdowns that are smaller than the largest historical drawdowns- has been performing within my risk tolerance levels - and has what I consider to be a very respectable profit.
On the other hand: Since the system was optimized using 5 years of data and no walk forward testing was done - essentially my live trading serves as the walk forward and that may reveal the systems instability - once it's already to late.
At least so far, the market has been telling you that your system is good. Who am I to argue? The process I use, which you state you didn't follow, isn't the only way to skin a cat. Heck, it might not even be the right way, or the best way - I have strategies that pass my process, but fail in the real world.
I'd say keep a close eye on the performance, and if and when it starts to degrade, be ready to pull the plug and stop trading it. Hopefully that will never happen, but when it does, just be prepared to take action.