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Does 'repainting' invalidate graphical backtesting?


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By 'graphical backtesting' I mean using the long/short position tool on TradingView.com.

Example

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Quote

Repainting can be a big problem while working out a trading strategy.
If you set up some indicators and look at the chart history it can be quite decieving, what may appear in the historical chart to be a great indicator that seems to create good signals on your chart when the lines cross, can actually turn out to be nowhere near as good in live trading because the historical chart only shows that indicator in a frozen moment in time, at the end of each price bar formation.
In practice you may find the indicator lines cross and uncross several times during each bar formation, rendering that indicator close to useless due to constant false signals that dont show on the historical chart.
This is one of the failings of the usual methods of time frame chart trading with indicators.

https://forums.babypips.com/t/what-does-it-mean-when-an-indicator-repaints/34965/4

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Can you see what 'strategy' I'm using by looking at that chart?  My backtesting suggests a 50% win rate, which is profitable with a 1:1.5 reward-to-risk. 

It's less than 50% successful with 1:2 on the indices, but makes more money.  Forex 'seems' to whipsaw more than the indices.  But ... need to test 100 times etc.

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14 minutes ago, dmedin said:

Repainting can be a big problem while working out a trading strategy.

Depends what you mean by 'repainting' indicators. Most indicators repaint the current bar until bar close because the calculations change when the input data changes, once the bar has closed there is no more incoming data and the indicator is fixed. Most broker supplied indicators work like this but where indicators are written and uploaded by a community they may not.

Some indicators are designed to recalculate the previous n number of bars with each new bar close such as a 'centered' triangular moving average, this gives a smoothed curved fit. Or some indicators may 'backpaint' such as many examples of Zig Zag which delays printing a signal 3 - 5 bars then when confirmed backpaints the signal. Finally some indicators will rearrange signals for a better fit once subsequent bars have been printed, these are favoured by scam indy sellers who can show a perfect fit picture but in reality the indy performance is mixed.

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So basically it's not an issue.  What's really an issue is me jumping into trades before the MACD makes its crossing.  Getting a 'jump start' is, in my experience, less profitable than simply waiting for the confirmation.  :)

ProRealTime does not have graphical backtesting as far as I can see.  I could program this system partially but ultimately I think it has to be discretionary.  So you could program some of the parameters as follows, and set the system to alert you when the conditions are met, then you would review the trade and decide whether to enter and where to put your stop based on candle patterns etc.

Buy conditions:

  • Price < 200 EMA 

  • MACD crossed below signal line from above 0 

  • Bearish candle (e.g. bearish engulfing where current close is > than previous candle close and current open is >= previous candle open)

  • PSAR is above price (sell)

Sell conditions are the opposite.

I suppose if you wanted to fully automate it you could simply place the stop a couple of points below/above the PSAR and set TP to 1.5x the distance of the stop.

There are other buy conditions and variations such as:

* Buy when MACD rises above signal while both lines are above 0 on a bullish candle making a higher high with a stop just under the previous bullish candle

* Opposite for selling

 

And all sorts of other variations and optimizations are possible.  Slope of the 200 EMA?

 

Edited by dmedin
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I'm SFB today and copied and pasted the wrong bit.

It should be:

SELL conditions:

  • Price < 200 EMA 

  • MACD crossed below signal line from above 0 

  • Bearish candle (e.g. bearish engulfing where current close is < than previous candle close and current open is <= previous candle open)

  • PSAR is above price (sell)

BUY conditions are the opposite.

Edited by dmedin
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