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Grossly Inaccurate "Profits" in Back Test when using Multiple Time Intervals

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  • Grossly Inaccurate "Profits" in Back Test when using Multiple Time Intervals

    Back Testing Trade Analysis Report grossly inaccurate: Percent Profitable reported 70% when in fact it is closer to 25%.

    I noticed that when back testing any trading strategy using multiple time intervals, the profits reported are grossly exaggerated, as the equity curve looks like the "Holy Grail" of trading and when I've actually turned on the strategy for automated trading rather then being a profitable strategy 70% of then time it was profitable 25 percent of the time.

    My "real" strategy used for automated trading with IB, is based on a variety of indicators, some included with eSignal some part of AGET but to illustrate the back test report inaccuracies, let's take the simplistic case of a strategy (makes little to no logical sense but illustrates the point) that buys when a close is above an EMA and goes short when the close is below the EMA.

    The strategy in the EFS is using a 15 minute interval, the chart interval in the loaded chart is a 5 min, NQ #F is the symbol the EMA is accessed in the EFS via the very simple function call: ema(5,inv(15))

    The first Image on the left is the Equity Curve when the chart Interval is set to 5 min, keep in mind in this example the chart 5 minute interval is smaller then the 15 minute interval referenced in the strategy.

    Click image for larger version  Name:	BTEquity1.png Views:	1 Size:	80.5 KB ID:	268293Click image for larger version  Name:	BTEquity2.png Views:	1 Size:	124.3 KB ID:	268294

    Once the chart interval is changed to the same 15 minute interval referenced in the strategy EFS the equity curve reverses direction and is a significant looser as can be seen in the chart on the right above. It's quite a valid option for to use a shorter time interval than the intervals used internally within the strategy, as many traders do and one would expect those responsible for validating the results of the back tester would done so, but apparently not.

    One can easily overcome this inaccurate back testing report by remembering that when the chart interval is less than the interval referenced in the strategy unless one insures the chart interval is the same as the intervals accessed internally with the EFS (via the ema(5,inv(15)).


    Hopefully users are also aware that when running any back test that invokes the "Strategy.methods", such as Strategy.buy or Strategy.dosell, if Strategy.MARKET is used with Strategy.THISBAR the profits reported in the back test report are also grossly inaccurate indicating another Holy Grail strategy has been found.


    Similar to profits reported using Strategy.MARKET and Strategy.THISBAR, there is in effect "looking back at price before entering the trade" inaccuracy in terms of the back tester using the Open rather then Close price. The final result is a even greater percent profitable reported in the back test reports using multiple time intervals.

    In the example above using using multiple time intervals, when a strategy triggered using a 15 minute multiple or external to the loaded charts time interval. The back test will report the trade as being filled on the 5 minute bar, when in fact in real time it is not filled until completion of the 15 minute bar, grossly inflating the profits reports.

    As in the first case when specifying Strategy.MARKET and Strategy.THISBAR, the fill price is the OPEN of the current bar, or when using external or multiple time intervals the price at the time of the lowest bar interval (5 minute chart loaded using on a 15 minute interval in the EFS). Even when the lowest chart interval is set to the same as the lowest in the Multiple Time Intervals referenced in the EFS, the fill price is reported on the lowest interval.


    In the past Avery, Alexis, and many others at the time went to great lengths in helping us in the forum to overcome the Strategy.MARKET, Strategy.THISBAR issues. They would post code examples, and were overly generous in their rime and kindness in helping us out. I for one miss those days of collaboration between the eSignal staff and user community. I believe it greatly enhanced the value of the product and provided a unique competitive advantage for eSignal.

    My suggestion to those struggling with developing profitable trading strategies is to validate the results in the eSignal Paper Trading DEMO Accounts.

    Good Luck.

    Glen

    glendemarco@gmail.com
    Last edited by demarcog; 05-09-2019, 08:15 AM.
    Glen Demarco
    glendemarco@gmail.com

  • #2
    Hi Glen,

    I am a newer user to eSignal and its automation system. How would one go about setting up the paper trading account to their automated system? It seems like every "beginner's" link I click on is disabled or it redirects me. I have my automated system built and EFS entitlements turned on for my account. I am connected to a paper trading account, but my automated system is not executing trades in real time. On my chart, the EFS icon not lit. Would this be something I would have to contact eSignal about?

    Any information about this topic would be very appreciated.

    Thank you,

    Jesse

    Edit:
    What prompt me for this post was I had the exact same problem for back testing. I too was receiving inaccurate profits, however I am going in and manually quantifying my results.
    Last edited by jglass3; 05-10-2019, 04:05 PM.

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    • #3
      Hi Jesse,

      I have had the same problem in trying to access eSignal Product Information. For example I just now in an attempt to find documentation relating to your question while navigating from the top level menu bar on the main eSignal Menu => Support - Product Training - Community - Knowledgebase also experienced an error the text of which is the following:

      "Your session has timed out. To return to this portal, please use the original bookmark or hyperlink. If you came to this portal using some other method, please contact your system administrator".

      I will try my best from memory to answer your question as the online doc is not accessible.

      The following are the general steps that it sounds like you have already setup.

      One thing I would quickly say might be causing the problem however is this:

      Whenever you restart eSignal insure the in the lower right hand corner of the eSignal Main Menu, that the EFS icon was clicked and trading enabled.

      Then you also need to click that EFS Icon in the title bar for each chart/symbol/strategy open. Clicking the grayed out EFS icon should turn it green.

      This is the basic Broker Manager Setup process which it sounds like you have already completed, but just in case:

      Signal has a trading interface that connects a Broker such as IB, FXCM, etc to your eSignal account. This provides two primary functions. One is to enable live trading, sending and receiving orders from eSignal to your brokerages account via the Main Menu Trade pull down. There you can control trading using the Trade Manager rather then using your brokers trading application.The eSignal Trade Manager is a very powerful and convenient feature. I've used many different brokers over the years and eSignal interface for trading is the best I have seen and I prefer this to IB's interface for example. You can set profit targets and stops right on the eSignal loaded dragging the associated lines graphically on the screen and also send Buy/Sell orders, etc.

      eSignal also comes with a Broker Manager also navigated off the main Menu by clicking the Trade pull. This is where a connection to the variety of available Brokers is defined. There is a default eSignal Paper Trading account already defined which included 5 available trading accounts DEMO, DEMO2, DEMO3, DEMO4, and DEMO5. This is the equivalent of having 5 trading sub accounts under one master eSignal Paper Trading brokerage account.

      To utilize either the paper trading or actual live broker trading and route orders to one or more of these accounts Select and click Trade from the Main Menu, select and click Broker Manager:

      You will see a list of available Brokers. In my case I renamed the eSignal Paper Trading to PTNQ60 and I also defined a connection for IB.

      You need to click on the Broker you would like to connect in your case eSignal Paper Trading, and click connect, the icon to the left should turn green, indicating it is connected.

      Click image for larger version  Name:	broker.png Views:	1 Size:	48.1 KB ID:	268297

      Then you load a chart with your strategy EFS. Click the Up Down Arrow icon on the Charts Menu Title bar to include the trade manager window in the loaded chart. Finally in the first line of the trade manager sub window select the Trading Connect and Account to associate the chart and strategy EFS with the brokerage trading account that orders using the broker trading functions will be routed to. In the case of the image below it is trading account DEMO5.

      Click image for larger version  Name:	demo5.png Views:	1 Size:	81.6 KB ID:	268298

      If all the above has been completed, the EFS icon in each chart's title bar is green and the "global" EFS icon in the lower right of the eSignal main menu is lit green and trades are still not going out when a trading condition has occurred then it's most likely a EFS/javascript issue.


      Hope this helps, best of luck with your strategy too.

      glen

      glendemarco@gmail.com
      Last edited by demarcog; 05-13-2019, 09:06 AM.
      Glen Demarco
      glendemarco@gmail.com

      Comment


      • #4
        Apparently any strategy that utilized multiple time intervals reports profits that are absurdly inaccurate. Although it's been many months and a incident opened and as requested by Avery in support I've not heard back, It would be great if there was some level of product support from eSignal but obviously that is not going to happen.
        Glen Demarco
        glendemarco@gmail.com

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