TrendMedium MetaStock Add-On
TrendMedium MetaStock Add-On
TrendMedium MetaStock Add-On
TrendMedium MetaStock Add-On  
About TrendMedium MetaStock Add-On
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TrendMedium is a high performance tool for helping you get the best results from your trading. You don't have to believe us, and in fact we encourage you to prove it to yourself. Please free to try the tests and see how they work for you. We're sure that you will not disappointed.

ē Walk Forward Test

Walk Forward Test is the most effective way to simulate a trading system being used on real data in real time. The test simulates the real life trading situation. It answers some very important questions about the trading system:

  • Will the trading system be profitable after optimization?
  • How effective will it be on unseen data?
  • How will the system perform after changes in trend, liquidity and volatility?

Walk Forward Test lets you verify the forward-trading ability of the system. Now you can tell whether the system will continue to bring profits after optimization or not. If your system is badly optimized then you should expect it to perform poorly during Walk Forward Test. On the other hand, if the system makes profit over a large number of Walk Forward Tests, itís most likely to be successful in the future. You can run Walk Forward Test for a given number of last days and estimate the REAL performance of your trading system on that data. Notice that simulation considers all your settings for the selected analysis pattern.
With Walk Forward Test, trader can clearly see the day to day trading activities and accuracy of the model.

  ē What this graphs show (Click on a graphic to enlarge it)

NASDAQ 15 minutes periodicity      NASDAQ 5 minutes periodicity

Real-time Walk Forward Test
15 Minutes Periodicity for NASDAQ
Real-time Walk Forward Test
5 Minutes Periodicity for NASDAQ

These graphs show the sort of information that you can expect TrendMedium to give you. In these tests we have used 15 minutes and 5 minutes time periodicities to calculate the bars for NASDAQ. As you can see, TrendMedium correctly identifies the turning points in the market and makes the decision to buy and sell to give you a steadily increasing return.

Note that the buy and sell indicators are calculated based only on the results of the data movements before the indicator. This means that TrendMedium is providing a true prediction of when to buy and sell, and is not working this data out "with the benefit of hindsight".

Also take a close look at the accuracy of TrendMedium when it is identifying a trend. Imagine what you could do if you had this information at your fingertips when you are deciding what to trade!

Note in this picture that TrendMedium is acting both as an Expert Advisor and as a System Tester in MetaStock. These are two of the modes that TrendMedium supports, and the easy integration and familiar presentation of information in MetaStock means you are able to get going quickly and easily.

(Click on a graphic to enlarge it)

SP500 1 year Walk Forward Test      IXIC 1 year Walk Forward Test

1 year Walk Forward Test for SP500 1 year Walk Forward Test for IXIC

These "forward backtests" allow us to check the performance of the model with known data, and to see how TrendMedium works in real life. Just imagine if you had this information at your fingertips in real time when you are trading.

Note that these results are not mock ups, but are the result of real test runs such as you will be able to do with your own data.

How TrendMedium does Walk Forward Test?

Prior to the test, the trading rules and optimal parameters are fixed. The system is then fed data from the same market that it has never seen before. This can be real-time data or historical data that did not form part of the data set on which the system was built. The results from the walk-forward test are then observed to verify their conformity to those observed during the in-sample test. A robust trading system will achieve a profit performance similar to that realised in the historical test, both in their size and distribution. It will generate approximately the same number of signals and display a similar risk - reward profile.

Hereís what happens when Walk Forward Test is run:

  1. TrendMedium chooses a starting point as a function of the number of walk-forward days (maximum 45 days in the trial version of TrendMedium).
  2. TrendMedium reads the data before the first day of the Walk Forward Test period. The first test date is 45 days before the last trading day. By default TM uses the period in 200 trading days before the current test trading date for the test.
  3. The optimal trading system is then applied to the out-of-sample data.
  4. After that, TrendMedium saves the signals generated by the system for the out-of-sample data for your analysis.
  5. Next, TrendMedium moves the optimization window forward one day and repeats the steps 2-5 for the specified number of Walk Forward Test days.

As you can see, itís very close to what you would do with paper trading. Another feature of Walk Forward Test is that not only it lets you find the optimal trading system, but also gives you the possibility to change its parameters and see the effects. This way you can compare different values for SUM, MOV ranges, and Calculation Period and choose the most profitable ones. Please note that you can run Walk Forward Test with the ReInvest feature turned either on or off.

Please read PDF documentation for more details. :: Eugene Labunsky 2002-2009