The CommandTRADE Blog

The Back Test is a feature within CommandTRADE/CommandTRADE FX that allows the user to historically test how a strategy would have performed if turned on at a certain date.  It is a great tool that can teach us quite a bit about how a strategy behaves in different circumstances and market conditions.  Listening to us on the CommandTRADE team you will hear some different opinions on the best usage of the feature; I'm going to go through my favorite uses.

First of all, I never use a Back Test result to influence my trade or strategy decisions.  I personally feel that there should be substantive reason to attach a strategy.  I make strategy decisions based on what I see in the charts and what I am expecting to occur for any given pair.  We see quite a few instances, more so among newer users (which is very understandable), where the back test results determine what strategies are being used.  Both the currency and equity markets are ever changing, while we do see trends that will continue for many days, the look of any given chart 1 or 2 weeks ago does not necessarily give us a great indication of how that same chart looks today.  The key to consistent results is to consistently use a strategy in similar market conditions or with similar chart patterns.

There are two main ways that I use the Back Test.  The first is to review what occurred with any given trade.  The second is for strategy creation.  The latter is where the bulk of my actual back testing will occur. 

I will review a large number of my trades in the Back Test screen.  I’m more of an active or day trader, so the number of trades I make in a day is normally not a very high number.  The main thing I research on a trade is how the charts looked when I turned on the strategy and what the entry looked like on the charts (was this trade one that I would have made if I was sitting in front of the computer).  If I see a string of rough trades using a particular strategy, I want to know why.  Am I turning it on at a bad time?  Is there something specific that keeps occurring for my trades to lose?  What could I have done differently to get a better result?  A lot of the time when I look back on a losing trade nothing jumps out at me.  I will scratch those up to bad luck.  There will be times when everything looks perfect and then the market does something funny. 

All strategy creation occurs in the Rule Generator and Back Test.  The actual process of back testing is a very key component of building a strategy.  I will back test among multiple days and multiple pairs on any given idea that I’m building.  I look for a couple of things when I’m running the tests.  I begin every strategy with a mental image of how an entry should look on the charts.  The multiple back tests are confirming that my rules generate an entry that is comparable to that mental image.  This is when I will begin to make adjustments to the strategies rules to create my ideal entry point.  The next batch of tests will involve adjusting the exit strategy.  I will typically start out with a fairly wide stop loss and target and make small adjustments to find the ideal level.  I will look at the profit/loss figures and win/loss ratio to hopefully settle on the best possible exit scenario.

All in all, the Back Test is a very powerful feature that allows us to look back historically and not only test a given strategy, but to get a snapshot of a historical point.

We have recently posted a Virtual 1-Day Training for CommandTRADE FX.  These are posted in 8 1-hour long segments that will give a complete breakdown on the functionality of the software.  These segments were created to give those users that are unable to attend one of our two day training events here in Dallas a good representation of what occurs during the first day of the training.  While we would always like to have our users attend the event, as it allows us the opportunity to get to know you, these videos are a great way to find out how all of the buttons and features of CTFX work.

You can get to the recorded training by going onto the website and selecting the Training tab.  There will be a link in the CommandTRADE FX section for Virtual 1-day Training.

Enjoy,

Harris Frankel
CommandTRADE Product Specialist

Equity traders should keep an eye out for the following events that just may propel the DJ up toward 9K.

1. XLF trades above and closes above 12.35-12/40 range this week.

2. broad based moves across all sectors.

3. Big moves in the tech sector as evidence via the QQQQ's. look for big volume as it breaks above 35.00 range.

4. Don't trade the news or your predictions. don't fight the tape!

nick p.

Many pro traders live by the "sell in May and go away" theme. Where the month or may is alive with weakness from sell orders prior to the summer time low volume action. Sort of like finishings up your final exams and going on vacation from school until next year. But...... May was a strong month and ended up nice. Wonder what the summer brings us?  just remember, low volume = high volatility. If there is no aggressive institutional selling, then what?  linger higher all summer???

Nick P.