forward testing is different from optimized back testing results...why?

 
i have made an ea which is showing very low drawdawn in backtesting with huge profits, but in forward testing with same inputs, its giving different results why so? how to properly backtest, i have done optimization too, but the in real live market the results are very different from backtesting

can anyone help me out???
 
neerajkadel10:
i have made an ea which is showing very low drawdawn in backtesting with huge profits, but in forward testing with same inputs, its giving different results why so? how to properly backtest, i have done optimization too, but the in real live market the results are very different from backtesting

can anyone help me out???

Without the code and informations about the EA we cannot imagine what happened.

What I think is that you are using MT4, backtesting an EA that trades around midnight. On MT4 backtests use fixed spread, which is surely not a real thing and you probably used a too low value compared to the real one around these hours.

But of course this is only a supposition...

 
neerajkadel10:
i have made an ea which is showing very low drawdawn in backtesting with huge profits, but in forward testing with same inputs, its giving different results why so? how to properly backtest, i have done optimization too, but the in real live market the results are very different from backtesting

can anyone help me out???

Probably, during the optimization process your expert advisor got "overfitted" to history data. This can easily happen if you only care about high balance outcomes during optimization. High profits during backtesting/optimization can be the result of  a view lucky trades. To avoid "overfitting" it is better to choose a parameter setup which consistantly generates profits over time and in every market phase. To evaluate this you need a sufficient nummber of profitable trades with a proper risk management, distributed over a large timespan and diversified market structures.  

If a strategy can create a profit curve like this, I would call it reliable: 

1. Enough trades to minimize the impact of "lucky shots" (In this case 11.427)

2. Good risk/reward ratio (Max Equity Drawdown 0.78%)

3. Good win rate (82.5%, but 10% would also be OK if you have the right Risk-Reward Ratio )

Result: Constant growth


What is a trend and is the market structure based on trend or flat?
What is a trend and is the market structure based on trend or flat?
  • www.mql5.com
Traders often talk about trends and flats but very few of them really understand what a trend/flat really is and even fewer are able to clearly explain these concepts. Discussing these basic terms is often beset by a solid set of prejudices and misconceptions. However, if we want to make profit, we need to understand the mathematical and logical meaning of these concepts. In this article, I will take a closer look at the essence of trend and flat, as well as try to define whether the market structure is based on trend, flat or something else. I will also consider the most optimal strategies for making profit on trend and flat markets.
 
sonaht #:

Probably, during the optimization process your expert advisor got "overfitted" to history data. This can easily happen if you only care about high balance outcomes during optimization. High profits during backtesting/optimization can be the result of  a view lucky trades. To avoid "overfitting" it is better to choose a parameter setup which consistantly generates profits over time and in every market phase. To evaluate this you need a sufficient nummber of profitable trades with a proper risk management, distributed over a large timespan and diversified market structures.  

If a strategy can create a profit curve like this, I would call it reliable: 

1. Enough trades to minimize the impact of "lucky shots" (In this case 11.427)

2. Good risk/reward ratio (Max Equity Drawdown 0.78%)

3. Good win rate (82.5%, but 10% would also be OK if you have the right Risk-Reward Ratio )

Result: Constant growth


Tastes... Usually that kind of equity curve is a clear sign of a strategy made for performing well only on tester.

I will be happy to be wrong, waiting for a similar real track record :)
 
Fabio Cavalloni #:
Tastes... Usually that kind of equity curve is a clear sign of a strategy made for performing well only on tester.

I will be happy to be wrong, waiting for a similar real track record :)
As this advisor is not for sale, It is sufficient when I'm convinced :)