The Strategic Trader
Detailed Strategy Evaluation

How reliable are the targets?

Before going much further, we need to determine if our targets are sufficient at removing random chance from the equation. I will run 10,000 simulations targeting 500 trades and 10,000 simulations targeting 15,000 trades. If any random simulation is able to exceed our target percent or target profit, then the values are not reliable enough. However, if 10,000 simulations are not enough to produce a value exceeding our targets, then I am satisfied. With enough simulations any target could be achieved, but we have to have realistic goals.

Results for 10,000 Simulations targeting 500 trades (3 bars into future):

No simulations were able to exceed either target profit nor target percent. 51 simulations were able to exceed 60%, but the closest any came was 62%. This is well below the 64.04% that we target. Five simulations were able to surpass +$7,000 but none came close to the +$10,000 target.

Results for 10,000 Simulations targeting 15000 trades (3 bars into future):

No simulations were able to exceed either target profit nor target percent. Several simulations got close but were unable to exceed targets. Because the target percentage is a lot smaller for 15,000 trades than 500 trades the safety margin appears small. However, I feel confident enough in these targets to consider anything that exceeds them to not be due to random chance.

Concerns:

My Primary concern while evaluating both the long and short baselines stem from the fact that both long and short trades have > 50% winning percentages. I was unable to reconcile how this could be possible. However, after evaluating trade by trade, I finally realized that NinjaTrader counts profit zero as a win. What happens is both the long and short simulations contain several trades that end flat. This inflates the winning % of both directions.

While evaluating these indicators we are not including commission or slippage. If we had, those flat trades would actually be losses and the winning % of both directions would go down. Since neither the evaluation of the strategies or the original baselines contained slippage/commissions all results obtained should still be valid. Once we attempt to create an actual strategy using what we learn we will include commission/slippage and will need to recalculate baselines accordingly.

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