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Liquid validity
Agreed, that is why rigorous forwards testing is vital.I agree with you that Forwards testing is the testing that accounts for slippage and spread and shows you how you perform with the strategy (not just taking every trade like you would with back testing).
The battle between optimization and curve-fittingAlso if your back testing for the last 5 years then you get a good sample test, unless your testing the 240 min charts and up, while covering all market conditions, because in the last 5 years the markets have been trending up, down and have gone sideways as well. So it wouldn't be curve fitting.
You place more emphasis on sample span rather than sample size.
Its good to have both.
Yes you do mention sample size, but you gloss over the fact that
sample size is more important than sample timespan.
You make the false assumption that forwards testing is separate from back testing.Also if your forward testing for 1 year how ca you know it's not curve fitting garbage as well... It's only 1 year worth of data... For example if you had a 60 min trend following system and you forward tested it from the 1/1/2013 till now on any AUD cross you would have made a killing...is that not curve fitting garbage?
A decent forwards test sample size and timespan is important yes.
What is more important is to see how a backtest of the forwards sample compares
to the forwards test results.
That will give an idea of how reliable your backtest is.
If the results are vastly different, the original backtest is worthless.
Backtesting is just a guide, confirmation comes from forwards testing.
You mention 50% drawdown as a maximum:I didn't say that everyone should risk 50% of their account, the percentage of the account risked if maximum drawdown happens depends on each person and should be chosen by each individual according to their risk tolerance.
So you say 50% (which is poor advice) yet don't offer a more realistic drawdown %...if you know roughly what your maximum drawdown will be, you can also see how much of your account you will lose if that happens and you will not make that % be more than 50% of your total account
Risk of ruin is greatest at the start of an account.i said "you will decrease the amount risked per trade as you increase in position size and implicitly decrease your risk of ruin"
and you respond "So you decrease size as risk of ruin decreases".
Just so I clarify this for you as you increase in position size, so from 1 lot to 2 lots and so on, your the percentage of your account risked per trade decreases, so at 1 lot you risk 2% per trade at 2 lots you risk 1.5% per trade and so on... This was only an example I'm not advocating any risk per trade that is mentioned above.
Suggesting anyone start with greater risk at that point is lunacy.
Excessive size or risk per trade at the start of the account amounts
to the same thing.
Its the classic mistake of an over leveraged, undercapitalised account.
Simple fact is, if someone does not have sufficient account size,
they are better off not trading at all.
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