online futures : Test Your System

2008-04-22 17:44:45

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Do you want to get involved in online futures trading? Trading in online futures is different to trading on online commodities. With online futures you have to test your trading system.

After building the trading system, test it before you risk any money. The developer of hundreds of trading systems said – “you need to know where you intent to go before you can get there”.

When testing a platform:
1. Learn the scripting language used for inputting your methodology code.
2. Next – the data. The type of data required to test the system is dependent on the time frame of the system.
Do you trade often in a day? – you need intraday data.
Do you trade once a day? – you need end-of-day data.

You should be careful about the quantity of data supplied.

There are two products on the market that can help you with this process if you want to trade in online futures.

The first product updates all data once it’s been paid for.

The second product is purchased with data up until the time of purchase – additional data must be purchased from a third-party and be plugged into the software.

When you test data remember that the majority of platforms use continuous data. Why is this important for trading in online futures? Because futures have rolling contracts. This creates the need for synthetic continuous contract which can impact the analysis by revealing better or worse results than they actually were: in fact, you can’t really adjust for this.

Being familiar with how the data providers adjust continuous price – this is just as important as avoiding over optimization. If you try a curve-fitted trading system in real time? Failure.

What is curve-fitting?
Optimizing the trading system according to specific data. Fitting the system for a certain amount of historical data. But in fact the future won’t exactly replicate the past – and because your system is curved to that data, it will certainly fail.

Even in the case that you use a single parameter like moving averages – it will fail. But in most cases, even more parameters are used and all are optimized.


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