The Strategic Trader
Detailed Strategy Evaluation

5 Minute Testing Procedure (Short Only)

We have already established a baseline for Long trades. Now we need to do the same thing on the short side. When comparing methods, some may behave differently when shorting than when going long.  The target will be any method that can predict market direction (5) standard deviations above the baseline average. We will establish baselines for both percent profitable and expected return per contract.

To establish a baseline we will run 100 random entry simulations against the target market. Because we do not know ahead of time the target trading frequency, we have to perform this test several times using various random rules. We will target 15,000 trades, 5,000 trades, 1,500 trades, and 500 trades over the sample period.  The simulations aim to predict the market direction 3, and 5 bars into the future.  We will be using a target market of ES Futures.

The strategies will not enter trades after 2:05  PM or before 8:30 AM. This ensures all exits are at the appropriate number of bars.

Baseline Results for 3 Bars into the future targeting 15,000 trades:

Percent Profitable: 53.96%
Expected Return:  +$5,345
Target Percent: 55.88%
Target Return: +$68,377

Baseline Results for 5 Bars into the future targeting 15,000 trades:

Percent Profitable: 52.54%
Expected Return:  +$8,939
Target Percent: 54.12%
Target Return: +$70,660

Baseline Results for 3 Bars into the future targeting 5,000 trades:

Percent Profitable: 53.85%
Expected Return:  +$380
Target Percent: 57.07%
Target Return: +$32,217

Baseline Results for 5 Bars into the future targeting 5,000 trades:

Percent Profitable: 52.67%
Expected Return: +$2,403
Target Percent: 55.97%
Target Return: +$44,050

Baseline Results for 3 Bars into the future targeting 1,500 trades:

Percent Profitable: 54.01%
Expected Return:  +3,32
Target Percent: 60.17%
Target Return: +$19,144

Baseline Results for 5 Bars into the future targeting 1,500 trades:

Percent Profitable: 52.65%
Expected Return:  +1,380
Target Percent: 58.98%
Target Return: +$25,199

Baseline Results for 3 Bars into the future targeting 500 trades:

Percent Profitable: 53.93%
Expected Return:  +$179
Target Percent: 64.24%
Target Return: +$9,766

Baseline Results for 5 Bars into the future targeting 500 trades:

Percent Profitable: 52.73%
Expected Return:  +$573
Target Percent: 63.92%
Target Return: +$16,306

These results show a different pattern than the long trades showed. When going long the expected return in most simulations were negative. The expected return on the short side is positive. Since all trades are for a pre-set number of bars, you could conclude from these results that the market moves down faster than it moves up.

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