Out-of-Sample Back-test Result

                              
If you have done your exercise, you would have got the result which looks similar to the screen below:

Not too bad, although not as good as the in-sample test, the out-of-sample test shows a profit of 633 points or USD 15,825.00 before transaction cost. You should be able to program it in by now.

If you have put in a little more effort, you would have found out that the number of winning trades is 111 and the number of losing trades is 59 which give us a winning percentage of 65.29% and a losing percentage of 34.71%. As usual, if the winning percentage is high you’ll have to sacrifice with a bit lower average winning per trades; here it is 19.8 points against -26.5 for average losing per trades.

The average per trade or expectancy of the strategy on S&P 500 index futures (2003-2008) is USD93.09 (before transaction cost). The profit factor would be 1.40. Not that fantastic on the out-of-sample test but what if we were to go live trading using it since the beginning of 2009 until now? Can anyone tell me whether it makes or loses money?


Disclaimer: Taken from CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.


AND

WHATEVER YOU READ HERE SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS ARE YOUR OWN RESPONSIBILITY.