Advanced Metrics and Optimizing

In this week's episode of Line Your Own Pockets, we discuss a question I received from a list member on strategies for withdrawing profits from your trading account.Topics discussed:Get your strategy working first; don't worry about withdrawing until that's obviousTrading is much easier if you don't need the moneySystems I've used for withdrawingKeeping living expenses low makes everything easierWithdrawing rules affect your trading mindset - and even the strategies you decide to tradeAnd much more...Of course, this is not financial advice - a good financial advisor and/or accountant can be worth every penny. ---Before you go!The next time you find yourself in a drawdown, I want you to stop what you're doing and head on over to betterbacktesting.com to sign up for my free backtesting email course.I hope to see you there!

In this week's episode of Line Your Own Pockets, we tackle one of the most important issues for systematic traders: is your backtest too good to be true?The best time to discover your backtest is unrealistic is as early as possible, even if it ruins your day (I've been there SO many times!).We discuss:Make your default stance skepticism rather than excitementUnderstanding future leak - probably the most common way backtests fall apart in liveBeware entry/stop/exits happening in the same bar (and how you can deal with this)How to identify unrealistic outlying trades quicklyYour reconciliation process with your backtest is your ultimate backstop for ANY issueAnd much more...Whether you're a seasoned veteran or a systematic trading newbie, you'll want to listen.SHOW NOTES:Sir Isaac Newton's terrible trading record ---Before you go!The next time you find yourself in a drawdown, I want you to stop what you're doing and head on over to betterbacktesting.com to sign up for my free backtesting email course.I hope to see you there!

In this week's episode of Line Your Own Pockets, we continue our discussion of metrics for optimizing strategies.What you choose to optimize when you're creating a strategy can make a big difference in your results.The obvious choice is Total Profit, but the optimal path that comes with that could be jagged and painful.Here are some of the topics we touched on:Optimize for your confidence, not just maximum profitTry creating two different versions of a strategy, each optimized toward different outcomesThe path a trade takes matters - not just its final P&LSmooth equity curves are easier to scale - here's whyDon't solve hypothetical problems too earlyAnd much more...SHOW NOTES:Previous episode: https://lineyourownpockets.com/episodes/what-metrics-should-you-optimize-forEfficiency function Dave mentions:Loss from mfe = mfe - profit Gain from Mae = profit - mae Inefficiency = (loss from mfe + gain from mae) Efficiency = -inefficiency And then a new objective function could be: Profit / inefficiency ---Before you go!The next time you find yourself in a drawdown, I want you to stop what you're doing and head on over to betterbacktesting.com to sign up for my free backtesting email course.I hope to see you there!

In this week's episode of Line Your Own Pockets, we discuss which metrics to use to evaluate trading strategies.There's no shortage of these - just look at the default report in an Amibroker backtest - there are dozens!Topics covered:Why it makes no sense to optimize on just one metricIf you had to choose one "metric," make it the equity curve.There is no perfect set of metrics, just like there's no perfect trading strategyWhich metric gets our vote as the most overrated (hint: it's not win rate)Optimize for an easier trading life rather than maximum returnAnd much more...There's something for everyone in this one. ---Before you go!The next time you find yourself in a drawdown, I want you to stop what you're doing and head on over to betterbacktesting.com to sign up for my free backtesting email course.I hope to see you there!

In this week's episode of Line Your Own Pockets, we answer a multi-part question from long-time list member Chip D.S. (name used with permission).The first part of his excellent question:Do you typically optimize longs and shorts separately. assuming there are enough trades after the split.  You have a couple newsletter articles that mention "directional" columns...so there must be situations where you think optimizing them together is best?We discuss:Why optimizing separately is a good default, but not a set-in-stone ruleLook for commonalities when optimizing the long versus the short trade setsHow "directional" columns are useful when combining long and short trade setsWhen going live with an Amibroker strategy, how to strip down the code to make it run fastAnd much more... ---Before you go!The next time you find yourself in a drawdown, I want you to stop what you're doing and head on over to betterbacktesting.com to sign up for my free backtesting email course.I hope to see you there!

We interview Steve Bravo from Massive (formerly known as Polygon.io).I passed along several questions from MabeKit Mastermind members, who brought up some good ones.We discuss:Why there are so many data providers and what makes Massive uniqueWhy the name change? (They changed from Polygon to Massive several months ago)How AI has changed the data business - dramaticallyDiscrepancies between data vendors and what causes themWhat's coming next from Massive? (L2, fundamentals, etc)And much more...Thanks to Steve for joining us! ---Before you go!The next time you find yourself in a drawdown, I want you to stop what you're doing and head on over to betterbacktesting.com to sign up for my free backtesting email course.I hope to see you there!

In this week's episode of Line Your Own Pockets, we discuss a question I received from a reader named Sridhar.He recently went live with 8 automated trading strategies - and none of them are performing well.In his words (used with permission, excerpted for clarity):Sridhar:Hi Dave, I'm struggling at the moment, and you're the person whose judgement I trust most on this.In less than 2 months, I found up to 8 intraday strategies, each with >1.5 PF, each researched to a locked backtest.The results don't match the effort. I'm down about $16.8k net of commissions since mid-July, and I've been red on 22 of 35 trading days.I hope things can turn around, but honestly, I'm losing spirit a bit. The process and the engineering are strong, and I'm still losing money. I'd really value your perspective.We discuss this in detail in this episode, with concrete steps to improve and identify the mistakes.Topics include:Start with 1-2 strategies rather than 8Trade tiny at first - you can learn a lot with minuscule size, so you can avoid "paying tuition" to the marketHow to plan for drawdowns before they happenDon't "build the pedestal" - use established backtesting software and focus on the important thing: the strategiesOnly scale after the market has given you concrete feedback that your process is soundAnd much more... ---Before you go!The next time you find yourself in a drawdown, I want you to stop what you're doing and head on over to betterbacktesting.com to sign up for my free backtesting email course.I hope to see you there!

In this week's episode of Line Your Own Pockets, Michael and I have a heated discussion on swing trading versus day trading.It starts innocently enough with a question about how to backtest a swing trading strategy with a "trail forever" component.But then it quickly turns into a swing trading versus day trading cage match.We do finally end up agreeing on the fundamental approach to backtesting a swing trading strategy - barely.Topics discussed:The differences between backtesting a day trading and a swing trading strategyOpen-ended trailing exits make backtesting more complicated, and how to handle this in your testHow outliers can affect your backtest and how the trailing-exit component can magnify themOverlapping positions suck up buying power, creating an overnight choke-pointAnd much more... ---Before you go!The next time you find yourself in a drawdown, I want you to stop what you're doing and head on over to betterbacktesting.com to sign up for my free backtesting email course.I hope to see you there!