New AI Backtesting Assistant Launch!

LuxAlgo - Backtester (S&O)

Nov 21, 2022
Static chart image
Dynamic Overlays
Support and Resistance
Signals
Forecasting
Machine Learning
Dashboard
Moving Averages
Trailing-Stop

The S&O Backtester is an innovative strategy script that encompasses features + optimization methods from our Signals & Overlays™ toolkit and combines them into one easy-to-use script for backtesting the most detailed trading strategies possible.

Our Signals & Overlays™ toolkit is notorious for its signal optimization methods such as the 'Optimal Sensitivity' displayed in its dashboard which provides optimization backtesting of the Sensitivity parameter for the Confirmation & Contrarian Signals.

This strategy script allows even more detailed & precise backtests than anything available previously in the Signals & Overlays™ toolkit; including External Source inputs allowing users to use any indicator including our other paid toolkits for take profit & stop loss customization to develop strategies, along with 10+ pre-built filters directly Signals & Overlays™' features.

Features

  • Full Sensitivity optimization within the dashboard to find the Best Win rates or Best Profits.
  • Counter Trade Mode to reverse signals in undesirable market conditions (may introduce higher drawdowns)
  • Built-in filters for Confirmation Signals w/ Indicator Overlays from Signals & Overlays™.
  • Built-in Confirmation exit points are available within the settings & on by default.
  • External Source Input to filter signals or set custom Take Profits & Stop Losses.
  • Optimization Matrix dashboard option showing all possible permutations of Sensitivity.
  • Option to Maximize for Winrate or Best Profit.

Settings

  • Sensitivity signal optimizations for the Confirmation Signals algorithm
  • Buy & Sell conditions filters with Indicator Overlays & External Source
  • Take Profit exit signals option
  • External Source for Take Profit & Stop Loss
  • Sensitivity ranges
  • Backtest window default at 2,000 bars
  • External source
  • Dashboard locations

Usage

Backtests are not necessarily indicative of future results, although a trader may want to use a strategy script to have a deeper understanding of how their strategy responds to varying market conditions, or to use as a tool for identifying possible flaws in a strategy that could potentially be indicative of good or bad performance in the future.

A strategy script can also be useful in terms of it's ability to generate more complete & configurable alerts, giving users the option to integrate with external processes.

In the chart below we are using default settings and built-in optimization parameters to generate the highest win rate.

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Results like the above will vary & finding a strategy with a high win rate does not necessarily mean it will persist into the future, however, some indications of a well-optimized strategy are:

  • A high number of closed trades (100+) with a consistently green equity curve
  • An equity curve that outperforms buy & hold
  • A low % max drawdown compared to the Net Profit %.
  • Profit factor around 1.5 or above

In the chart below we are using the Trend Catcher feature from Signals & Overlays™ as a filter for standard Confirmation Signals + exits on a higher timeframe.

By filtering bullish signals only when the Trend Catcher is bullish, as well as bearish signals for when the Trend Catcher is bearish, we have a highly profitable strategy created directly from our flagship features.

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While the Signals & Overlays features being used as built-in filters can generate interesting backtests, the provided External Sources can allow for even more creativity when creating strategies. This feature allows you to use many indicators from TradingView as filters or to trigger take-profit/stop-loss events, even if they aren't from LuxAlgo.

The chart below shows the HyperWave Oscillator from our Oscillator Matrix™ being used for take-profit exit conditions, exiting a long position on a profit when crossing 80, and exiting a short position when crossing 20.

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Counter Trade Mode

Our thesis has always firmly remained to use Confirmation Signals within Signals & Overlays™ as a supportive tool to find trends & use as extra confirmation within strategies.

We included the counter-trade mode as a logical way to use the Confirmation signals as direct entries for longs & shorts within more contrarian trading strategies. Many traders can relate to using a trend-following indicator and having the market not respect its conditions for entries.

This mode directly benefits a trader who is aware that market conditions are generally not-so-perfect trends all the time. Acknowledging this, allows the user to use this to their advantage by introducing countertrend following conditions as direct entries, which tend to perform very well in ranging markets.

The big downfall of using counter-trade mode is the potential for very large max-drawdowns during trending market conditions. We suggest for making a strategy to consider introducing stop-loss conditions that can efficiently minimize max-drawdowns during the process of backtesting your creations.

Sensitivity Optimization

Within the Signals & Overlays™ toolkit, we allow users to adjust the Confirmation Signals with a Sensitivity parameter.

We believe the Sensitivity paramter is the most realistic way to generate the most actionable Confirmation Signals that can navigate various market conditions, and the Confirmation Signals algorithm was designed specifically with this in mind.

This script takes this parameter and backtests it internally to generate the most profitable value to display on the dashboard located in the top right of the chart, as well as an optimization table if users enable it to visualize it's backtesting.

In the image below, we can see the optimization table showing permutations of settings within the user-selected Sensitivity range.

indicator image

The suggested best setting is given at the current time for the backtesting window that's customizable within the indicator. Optimized settings for technical indicators are not indicative of future results and the best settings are highly likely / guaranteed to change over time.

Optimizing signal settings has become a popular activity amongst technical analysts, however, the real-time beneficial applications of optimizing settings are limited & best described as complicated (even with forward testing).

Strategy Properties (Important)

We strongly recommend all users to ensure they adjust the Properties within the script settings to be in line with their accounts & trading platforms of choice to ensure results from strategies built are realistic.

How to access

You can see the Author's Instructions below to learn how to get access on our website.

Trading is risky and many will lose money in connection with trading activities. All content on this site is not intended to, and should not be, construed as financial advice. Decisions to buy, sell, hold or trade in securities, commodities and other markets involve risk and are best made based on the advice of qualified financial professionals. Past performance does not guarantee future results.

Hypothetical or Simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, including, but not limited to, lack of liquidity. Simulated trading programs in general are designed with the benefit of hindsight, and are based on historical information. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.

As a provider of technical analysis tools for charting platforms, we do not have access to the personal trading accounts or brokerage statements of our customers. As a result, we have no reason to believe our customers perform better or worse than traders as a whole based on any content or tool we provide.

Charts used on this site are by TradingView in which the majority of our tools are built on. TradingView® is a registered trademark of TradingView, Inc. www.TradingView.com. TradingView® has no affiliation with the owner, developer, or provider of the Services described herein.

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