Reasons for failure of Algo from backtesting to forward testing

[puneetsinghania1980]

The idea that jagankris posted on nifty trading is nothing but a very crude form of position management and believe you me .. If you apply his formula in live market.. You will be surprised to see the kind of positive results... It all boils down to position management...cheers

 

[RavishReport]

I guess after reading all these posts, I would provides bit of my insight.... It's not the data feed nor will any higher level of broadcast improve your results in live market. As a general rule of thumb.. Any TA based Algo can be at best right at 60% if the times. Usually in back test, we look at being trading always same quantity for buy and sell as and when the signal comes. Then usually to get better results we keep optimizing the parameters and do not realize that we are back fitting the data... The biggest difference that you can really make in live trading by using the simples of the algorithm is to focus very strongly on position management. Position management is the key differentiation in being a successful trader and an unsuccessful one.

Any example on positional management to understand the concept.

 

[puneetsinghania1980]

Sorry for late reply .... I would give only a very crude example... Simplest form of position management would be risking only 5% of your capital on each trade

 

[puneetsinghania1980]

However this is thee most crude example but it works.... There are many highly advanced and scientific method of optimal positions sizing... For eg.. Half Kelly or volatility based positions sizing. Volatility based position sizing comes from technical analysis and used ATR whereas the half jelly comes from the quant side....google it... Learn and apply.... Best fund managers are best not because they have some magic wand.. Because they are smart at risk management or in other words positions sizing