System Testing

February 28, 2013
By

(This article was first published on Copula, and kindly contributed to R-bloggers)

R at Work…crunching numbers

If you wanna find out how your trading idea would have coped in the previous years you would perform a backtest. For years I have used commercial software but could not find a package, which I would really recommend. I have to admit that my criterias might be very specific.

That’s why I looked at R closer and I’m impressed by the quaility of the available packages and the strong community.

The packages I’m using on a daily basis

blotter
TTR
PerformanceAnalytics
TTRtest

They are really the backbone of my set-up. Now testing a system is in my mind something really customized and I can only highlight what is important to me and give you some reasons why I’m paying attention to those aspects.
For the avoidance of doubt, when I’m refereing to system testing, I’m not suggesting that we use a pure Technical Analysis approach. I’m not to much into this type of systems, also I have to admit that a very stable system over many years is based around ATR and ADX.

In my mind a system is supposed to give you a clear Entry and Exit Point and when I say clear I mean I prefer a buy or selllimit I can put through to my broker.

I never simulate on market orders or as unfortunately used in various systems, conveniently using the Close price.  If you don’t get a precise limit at least simulate with the worst case – being the daily Low.

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