Discussions about the testing and simulation of mechanical trading systems using historical data and other methods. Trading Blox Customers should post Trading Blox specific questions in the Customer Support forum.
I thought this comment by Charlie Wright was interesting:
Over the last 6 years, our real time trading has correlated in excess of 90% with our hypothetical models. The reason it is not 100% is because we experience less slippage and fees in actual trading than we use in our hypothetical models.
Maybe even more interesting than the actual vs. backtest comment is this one:
John Gallwas: Do you have an opinion on whether or not the markets have changed since you began investing in futures?
Charlie Wright: Most definitely. The major assumption that trend-following managers made in the last 30 years has been that a diversified portfolio of non-correlated futures markets lowers risk. Our research confirms that in the last few years, all the world’s futures markets have been correlating to a high degree - especially the daily volatility. So the basic supposition for portfolio risk control that managers have based their systems on for the last 30 years may be obsolete. You can see the difference in performance between managers that have grasped this change and those who have not.
They have done their homework and have achieved accurate and conservative simulations. I consider 90% correlation to be very high.
They are using $75 per trade for slippage and commission for all instruments and considers it the most important variable costs. They could be able to get even more realistic simulations by setting this figure by instrument since point values vary by contract as does market volatility etc. (But their software package may not allow it.)
