After years of research, development, and testing, and most recently trading equities, commodities, and forex, we decided to offer a managed stock/forex/commodities account program. When it comes to performance, the question that is always debated is whether it is better to have live trading results, over a limited period of time, or back-tested results over a much longer period of time. The answer – IT DEPENDS.
If the system is based on traditional trading which is generally rules-based, up to a point, it can be hard to fully back test. Fully rules-based systems can be developed, but they are the exception vs. the rule. In these cases, a live account is really the only way to judge the system. These are generally over a limited period of time and market conditions. So it may give positive results for the moment but how long will it last? If you have a fixed interval, quantitative system like our system then the answer to the question is it really doesn’t matter whether you use a live account or a back-tested simulation. The reason- the results are the same. We have predetermined, based on an anticipated market move, what trades we will, or would have taken. We know when we would have entered and when we would have exited either with our profit or with our stop.
The ability to back test our system, over a 10 year period which we have done, is just one of its many benefits. Our results in most markets, including forex, are our trades are correct 65%-75% of the time. Our profits are equal to or greater than our loses. Our system is generally profitable 10 out of 12 months a year and we would expect returns of about 5%/month.