Testing across currency pairs means that we do not need to backtest for years back, testing a market behavior that is long gone.
This article is written by Søren Beissenherz Lanng who is the founder and CEO of TickCOM.
It is no secret that the majority of the markets have been very directional over the past 8 years; stocks and bonds have been in a rally since 2008, while gold and oil have been in a bear trend.
This has had a great impact on the development of automated strategies, since any long strategy for almost any stock will work very well when backtested using the past eight years of historical data. Perhaps if moving into very short timeframes we can achieve a sort of balanced strategy in terms of the long/short ratio, but the performance will still be influenced by medium and long-term trends.
Backtesting the aforementioned markets therefore requires much attention and care, especially if optimizing a strategy.
However, strategies for stocks on a 15 minute timeframe would not be possible to backtest for years to come! Stocks traditionally have a very strong correlation, and the same goes for bonds- meaning that we cannot even test a strategy across different instruments on these markets.
This will likely have an impact on the automated trading strategies that are currently running in the stocks and bonds markets. These have been working for the past 8 years, but at some point will fail.
There is an alternative and solution to this current paradox within strategy development and backtesting.
The alternative is to move to currency pairs, where we have a high count of instruments, some of which are correlated, some not. If, for example, a strategy is tested across ten different non-correlated currency pairs and gives similar results, with equity curves also behaving equally, this strategy is clearly a robust one.
The use of different currency pairs, rather than stocks and bonds, is a very powerful tool for developing and backtesting automated trading strategies. It is much more informative and useful to test a strategy using 3 months of 1 minute data across 10 different currency pairs, than to backtest a strategy on one instrument over 8 years of 1 minute data.
Testing across currency pairs means that we do not need to backtest for years back, testing a market behavior that is long gone. We know that a strategy works until the market’s behavior changes, and then it doesn’t work anymore.
And so, the faster we develop strategies, the more recent the data we can use- and the higher is the probability that we have developed a strategy that will also work next week.
This article is written by Søren Beissenherz Lanng who is the founder and CEO of TickCOM.
It is no secret that the majority of the markets have been very directional over the past 8 years; stocks and bonds have been in a rally since 2008, while gold and oil have been in a bear trend.
This has had a great impact on the development of automated strategies, since any long strategy for almost any stock will work very well when backtested using the past eight years of historical data. Perhaps if moving into very short timeframes we can achieve a sort of balanced strategy in terms of the long/short ratio, but the performance will still be influenced by medium and long-term trends.
Backtesting the aforementioned markets therefore requires much attention and care, especially if optimizing a strategy.
However, strategies for stocks on a 15 minute timeframe would not be possible to backtest for years to come! Stocks traditionally have a very strong correlation, and the same goes for bonds- meaning that we cannot even test a strategy across different instruments on these markets.
This will likely have an impact on the automated trading strategies that are currently running in the stocks and bonds markets. These have been working for the past 8 years, but at some point will fail.
There is an alternative and solution to this current paradox within strategy development and backtesting.
The alternative is to move to currency pairs, where we have a high count of instruments, some of which are correlated, some not. If, for example, a strategy is tested across ten different non-correlated currency pairs and gives similar results, with equity curves also behaving equally, this strategy is clearly a robust one.
The use of different currency pairs, rather than stocks and bonds, is a very powerful tool for developing and backtesting automated trading strategies. It is much more informative and useful to test a strategy using 3 months of 1 minute data across 10 different currency pairs, than to backtest a strategy on one instrument over 8 years of 1 minute data.
Testing across currency pairs means that we do not need to backtest for years back, testing a market behavior that is long gone. We know that a strategy works until the market’s behavior changes, and then it doesn’t work anymore.
And so, the faster we develop strategies, the more recent the data we can use- and the higher is the probability that we have developed a strategy that will also work next week.
Devexperts Checks Off Type 2 SOC 2 Audit for Enhanced Data Security
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
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Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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