In the past few days I've been trying to optimize my trend follower to some charts I'm following. SLV is the first one optimized and running. Basically, I took my follower algorithm and optimized the two main parameters for the backtest done in the chart's history.
Why optimizing?
I think that each equity has its intrinsic characteristics and dynamics. So, if instead of having only one trading system for all equities, I had a bunch of customized followers?
I'm not quite sure yet if this assumption is true or just a phalacy, but I am testing it. The first chart I choosed to show you is the SLV (silver ETF).
Please see.the SLV daily chart with default follower parameters:
Take a look at the backtest results. It starts in 1 of May of 2006 and ends with today' s close. The initial capital is 50.000€ and considers 13€ of trading costs in each operation. Regarding capital management there isn't any type of stop loss, but only profit reinvesment. I'm using both long and short positions (even with long positions only, the results are quite good). The capital reached by today is 72.114€ or 44.23% profit.
Now, the chart with the optimized follower for the SLV chart:
With follower's optimization the result is by far profitable: 187.5% vs 44.23%.
This is an indication that optimization may be a very helpful tool. I have some faith here for the SLV chart, because the optimized parameters are pretty close to the default ones I'm using in the other charts. Only time will tell if this the way to trade...
As usually...trade safely!
3 comments:
Don't be too confident that "each equity has its intrinsic characteristics and dynamics".
The only thing common is that behind every trade is a human being. But this is the most important factor of all.
Hi Pathlost!
Thanks for your reply.
I am not that confident about that statement...I'm only giving it a shot.
Behind any trade is a human being...for sure...however, behind any traded equity is a certain amount of human beings and that amount tend to be the same during every trend...during every trading cycle.
I think that set of traders may suggest that an equity (silver for example...) will have certain characteristics that other equities won't (e.g.: Silver vs Indian Sensex).
Regards.
Good argument: "behind any traded equity is a certain amount of human beings"
The other part I don't know if is true: "and that amount tend to be the same during every trend...during every trading cycle" but you can eventually have a point there. Keep up the good work, who knows you can make some real nice breakthrough!!!
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