Optimization Strategies


Back testing and Optimization are great tools when used correctly. When used incorrectly, all they do is cost you money. Unfortunately, most traders don't back test... they "back-fit."

In trading, one size does not fit all. You should trade one way in a Bull Market, another way in a Bear Market, and another way in flat and choppy markets.

Running optimization on a large sample of data in order to find an optimal solution for all market conditions is an exercise in futility. Testing a trading strategy on the same sample of data you used to optimize that strategy is nothing short of self-delusion.

Our Optimization and Back-Testing Tutorial (in our Members Area) will show you how to get the most out of MultiChart's back-testing and optimization features, and how to be prepared to adjust your trading strategy for any market condition.

The bottom line is profitability. With MultiChart's back-testing and optimization capabilities, you will learn how to attain and maintain profitability regardless of your past trading results.

Here are some additional advantages of using MultiCharts...

Strategy Creation & Testing

MultiCharts comes with more than 80 pre-built trading signals that can be combined into virtually thousands of trading strategies without any programming what-so-ever.

You can also create your own custom signals using our EasyLanguage®-compatible programming language. You can then test them on historical data before taking risks.

You can also set up different strategies using options such as commission, slippage, initial capital, interest rate, and trade size. Please click on the thumbnail images below to see examples of strategies easily created by combining our pre-built trading signals. (Note: LE=Long Entry, SE=Short Entry, LX=Long Exit, SX=Short Exit)

     

Create Performance Reports on the Fly

The Strategy Performance Report includes over 180 performance measures to help you analyze your strategy based on historical data. You'll know what your strategy's average profitable trade, average losing trade, number of consecutive winning and losing trades, and average time in trades could have been.

You can also learn details like what the longest time period between winning and losing trades would have been.

You'll be able to evaluate your strategy with a list of established risk-reward ratios, and see how your strategy could have performed from perspectives such as entry and exit efficiency, time in the market and stability. You'll even get a Trade-by-Trade report that you can sort by total percentage of profit, total efficiency rating, run-up and more.

Please note that each field in our Performance Report includes a brief description of that field and suggestions for how to use it so traders not familiar with optimizing trading strategies can get up to speed quickly.

Please click on the thumbnail images below to see examples of our performance reports.

     

See Performance Data More Clearly
with Visual Charts & Graphs

Since it's helpful to see performance data in more than one format, your MultiCharts Strategy Performance Report also includes over 20 state-of-the-art graphs to help you view key simulated performance data visually.

This means that whether you're testing your idea on one day, one year, or up to 20 years of intra-day historical market data, MultiCharts instantly shows you whether your strategy would have been profitable or unprofitable in the past, the annual rate of return, number of winning and losing trades, and much more.

Each of our Performance Charts includes a brief description of that chart and suggestions for how to use it.

Please click on the thumbnail images below to see examples of our visual performance charts.

     

Strategy Optimization

Optimization is an integral part of strategy testing. Done properly, it can be a powerful tool for understanding your strategy's behavior and evaluating its capabilities.

Each Signal in a trading strategy suggests a number of questions. Depending on the Signals you are using, they might be:

All of these questions can be answered using Optimization. MultiCharts offers two methods of optimization. Both are described below...

Exhaustive Optimization

(also known as Brute Force Optimization)

Exhaustive optimization tests each potential solution so the best combination of factors can be found.

But even with just a few parameters to be optimized, this can take unacceptably long... sometimes days. So exhaustive optimization should be applied only when there is a small number of possible combinations to test.

Save Time with Genetic Optimization

Genetic optimization gets as close to an optimum strategy as possible by using data sampling. This uses only a fraction of the time it takes to do Exhaustive Optimization.

The Genetic Optimization algorithms are powerful enough to analyze hundreds of parameters in an acceptable timeframe. MultiCharts offers multiple settings that allow you to fine tune the Genetic Optimization process for speed and accuracy.

Please click on the thumbnail images below to see how easy it is to set-up Optimization.

Note that a running count of the number of simulations required as you enter parameters is kept in the lower left corner of the screen so you can determine whether to use Exhaustive or Genetic Optimization.

     

Optimization Reports

MultiChart's Optimization Report displays the results of the optimization process and makes it easy to choose and apply the necessary output combinations by one or several criteria.

For instance, if you want to find the strategy with maximum Net Profit and minimum Max Draw-Down you need to sort Net Profit data in ascending order and Drawdown in descending order.

Please click on the thumbnail images below to see how easy it is to sort the Optimization report by the parameters of your choice.

  

3D Optimization Charts (Advanced)

3D Optimization Charts allow you to see the most robust parameter zones and avoid over-optimization (curve-fitting).

In cases where strategy test results are changed drastically with an insignificant change in inputs, then the strategy becomes suspect.

MultiCharts can superimpose one or several surfaces. This can be necessary when you want to compare Genetic Optimization efficiency with that of Exhaustive Optimization, or compare the robustness of several different strategies.

The charts draw 3D surfaces by all criteria available in the Optimization Report such as Net Profit, Percent Profitable, Max Draw-Down, and many others. When you move the cursor over the chart surface you can see input and output values, which simplifies the analysis.

Please click on the thumbnail images below to see a sample of a 3D Optimization Chart.

  

These optimization features, along with many others, are why so many traders are choosing MultiCharts as their charting platform. Will you?

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