{"id":7778,"date":"2019-08-07T13:00:50","date_gmt":"2019-08-07T17:00:50","guid":{"rendered":"https:\/\/www.optimusfutures.com\/tradeblog\/?p=7778"},"modified":"2019-08-07T13:00:50","modified_gmt":"2019-08-07T17:00:50","slug":"steps-to-evaluate-trading-strategy","status":"publish","type":"post","link":"https:\/\/optimusfutures.com\/blog\/steps-to-evaluate-trading-strategy\/","title":{"rendered":"Is Your Futures Trading System Not Working? Find Out Why and How You Can Fix It."},"content":{"rendered":"

This article on How to Evaluate Your Trading Strategy is the opinion of Optimus Futures<\/em><\/p>\n

\"6<\/a><\/p>\n

Note: the terms \u201cstrategy\u201d and \u201csystem,\u201d though fundamentally different, will be used interchangeably as the topic of this article can be applied to both concepts.<\/em><\/p>\n

Successful traders rely on strategies (and systems) capable of providing trading opportunities across a wide and varied range of markets and market conditions. The systems they employ are often adaptable to variance, as market conditions tend to vary unpredictably, sometimes frequently, depending on the underlying economic environment. But there are times when a system\u2019s adaptability may not go far enough.<\/p>\n

And what if you happen to find yourself holding on to a futures trading system, that, despite its degree of adaptability, may no longer be compatible with the market? Are you compatible with your trading strategy?<\/a> What might you do then? Will you alter the strategy, and if so, how would you go about it? Even worse, would you swap one strategy or system for another, what we refer to as \u201csystem hopping\u201d?<\/p>\n

Sometimes it\u2019s important to alter your trading style, whether you are an experienced or new trader. In this article, we\u2019ll offer a few tips on making this transition, and how to go about it in a manner that\u2019s both smooth and methodical.<\/p>\n

Follow these 6 steps to evaluate your trading strategy:<\/p>\n

Step 1: Determine the Need for Change<\/h2>\n

<\/div>Is it truly time to alter your trading strategy?<\/h3>\n

The first and most important step is to carefully evaluate the need<\/em> for such a change. Do you have enough sample data (i.e. enough trades) to adequately assess its performance against its historical stats? Many traders, impatient with a strategy\u2019s poor performance, fail to give the system enough time to show its true colors, whether favorable or unfavorable. Either way, you must give it time.<\/p>\n

If a system is truly versatile, it will consider the nuances of changing market conditions (not all the nuances, of course, but most). So, if a temporary market condition makes the system perform poorly, then perhaps the system\u2019s poor performance may be expected, or built into the design. After all, there\u2019s no system that can perform optimally 100% of the time.<\/p>\n

As a trader, you are responsible for testing the system\u2019s viability across different market conditions before you can truly assess its worth.<\/p><\/blockquote>\n

You need to have the patience to give your strategy the amount of time necessary for a sound evaluation. The last thing you want to do is to become a \u201csystem hopper,\u201d where you are likely to catch the drawdowns of even profitable systems (as you are likely to hop into a profitable system at the peak of a \u201cwinning streak,\u201d only to catch its losses).<\/p>\n

The main goal of this first step is to give the system enough time for an adequate evaluation. Once you have adequate sample data–which will vary from system to system depending on its performance stats–you can then compare its performance with past results.<\/p>\n

<\/div>Assessing Current Performance of your Trading Strategy with Past Results.<\/h3>\n