Crude Oil Strategy Mining Study (Part 1)

Today I continue a blog mini-series focused on putting context around trading system development. I am trying to better understand what can be expected from strategies that look good in the developmental phases.

With each subsequent study, I am discovering nuances and better learning the software. My previous study is described here. In the current study, I have attempted to compile pieces from previous studies and avoid earlier mistakes.

As I learn, the exact methodology varies from study to study. I previously studied equities while I now move forward with crude oil. The following study is my first to include a dedicated stop-loss. What follows is also my first study featuring a highest high (lowest low) stop for long (short) trades. Subsequent studies may not include these. Regardless of the differences, my ultimate goal is to walk away with some big-picture conclusions based on recurring themes found inside the numbers.

Full details on the following study is included in Mining 8, but I will go into extensive detail here.

My process with the software was very repetitive:

• Enter correct settings (e.g. long/short, HHV/LLV stop, 2/4 rules, OOS at beginning/end), clear and select Random 1000 entry signals, and remove signals in Time category.
• Run continuous simulation x 5′.
• Sort by All: PNLDD and screenshot worst [34*] strategies.
• Eye results to make sure no duplicate strategies included (discard and replace).
• Transcribe 34* strategy numbers into spreadsheet.
• Sort by All: PNLDD and screenshot best [34*] strategies.
• Eye results to make sure no duplicate strategies included (discard and replace).
• Transcribe 34* strategy numbers into spreadsheet.
• Select “Re-run strategies with adjustments,” adjust backtest dates, and [4-rule strategies only] require all rules.
• Maximize Results window, right click x2,* and select “All.”
• Group together first six* Results windows then every four thereafter with first on top, second below top row of overall Results window (seen in background), and subsequent windows somewhere below.
• Once all 34 re-runs complete, select Results windows four (six for first group) at a time and sequentially drag on screen with Net PNL vertically aligned.
• With four (or six) tiled on screen,* drag Excel spreadsheet directly below fourth Results window and transcribe Net PNL, PNLDD, # trades, Avg Trade, and PF.
• With six tiled, transcribe stats for first four, drag spreadsheet just above Results windows 5-6, transcribe stats for these, and close out 5-6.
• [Drag spreadsheet below fourth Results window if six originally tiled and] Close out Results windows 1-4.
• Run Randomized OOS, noting in spreadsheet strategies that pass two consecutive runs (second paragraph here).
• Run Monte Carlo (MC) analysis, noting in spreadsheet strategies with resample average DD less than backtested DD (seventh paragraph here).
• Close all MC and Randomized OOS windows.
• Sort by All: PNLDD worst to best.
• Repeat Randomized OOS and MC analysis steps for worst strategies then close all associated windows.
• Repeat steps for re-running strategies over incubation and transcribe OOS2 (third bullet point) performance stats.
• Re-randomize entry signals, remove time-related signals, and enter or check to make sure correct settings still entered.
• Rinse and repeat.

I will continue next time.

* — Many of these steps are reflective of my particular screen size, resolution, etc.