Article Library
What's New
About Us
Site Map


Unlimited Systems

Auto-generate unique

trading strategies for



Position Sizing Tool

Position sizing software for

trading. Trade smarter.

Maximize results.



The Breakout Bulletin

The following article was originally published in the August 2002 issue of The Breakout Bulletin.

Answers to Your Questions

Q:  I ran an optimization test, but am not sure I did it correctly.  At first I tried to optimize all variables in increments of 0.1, but that would have produced 4.8 million tests!  So I instead started to optimize one variable at a time, working my way down the list of variables, until the variables held steady. I set the equity input equal to $100,000. Please comment on my optimization technique.


A:  I recommend setting the equity parameter equal to zero when optimizing. That way, it will default to one contract per trade and you don't have to worry about the account size settings. I usually either do one variable at a time or 2 at a time. For example, you might try optimizing the entry and exit parameters for long trades together, then the 2 parameters for the short trades, followed by the trend parameter.

I like to look at several performance statistics when optimizing. I generally optimize on the profit factor, but always check the equity curve to make sure it is as straight as possible. I also like to have at least 100 trades in my sample. I like to see the profits for the most recent period strong, a low number of max consecutive losers, and a high net profit. I also like to see a small max loser and a good balance between long and short trade profits. Finally, I like to make sure that the parameters I end up with produce reasonable trades. By this I mean that the stops can't be unrealistically tight or so loose that I'm not comfortable with that much risk. Similarly, the entry fractions shouldn't be so small that I enter on every false breakout or so large that I get too few trades.

Of course, there's no one correct way to choose parameter settings. To a large extent, it depends on what kind of trading you like to do. With a little searching, you will probably find completely different parameter sets that give equally good, although different, results.

Q:  I have looked at the new Minimax version but cannot get the parameter settings quoted on page 4 of the new manual to give me anything like the performance summary results shown on pages 13 and 16. Could you please confirm the setting used for these results were as per page 4 or, if not, could you let me know what they are?
A:  The parameters on p. 4 of the new manual (v2) are the ones used to generate the results listed in the manual. Your data may be different than mine. I used TS 6 with the full session (23 1/2 hour) contract e-mini data series to generate these results. In TS 6, these are symbols @ES and @NQ. You should confirm that your data covers the full session and not only the day session. You should also confirm that it covers the same time period as in the user's guide. If you're not getting the same results but you believe your data is good, I would recommend reoptimizing. I recommend doing this in any case so that you get to choose the parameters that give the kind of trading results you prefer. You may prefer to minimize your drawdown at the expense of net profit, or maybe you'd rather tighten up the stops even though it might reduce the percent winners. There's no one best set of parameter values. Also, you'll probably be more confident in the system if you explore different parameter sets and choose your own.
Q:  What should I do in the spreadsheet when a new contract starts trading? I use CSI for my data, so my data backadjusts after the rollover date. Does this mean I need to backadjust the data in the spreadsheet manually?
A:  After a rollover, the easiest way to handle it in the spreadsheet is just to copy over all your existing data with the newly adjusted data from CSI. That way, all your data will be back-adjusted properly. For example, let's say the rollover date for the Sep contract is Sep 18th. On that date, your CSI data series will back-adjust. This may change the prices prior to Sep 18th slightly based on the difference between the closes of the Sep and Dec contracts on Sep 18; this is the essence of the back-adjusting process. To make sure all the data in the spreadsheet is adjusted accordingly, you could copy your CSI price data from the beginning of the date in your spreadsheet to Sep 18th, and paste this data into your spreadsheet over the existing data. This way, all the data in your spreadsheet will be up-to-date. The system only looks back about 14 days, however, so this will only make a difference for some of the calculations for up to two weeks following the rollover date. I haven't tested this, but based on how the system works I suspect the difference between back-adjusting and not back-adjusting (i.e., using the nearest futures) will be fairly small.

That's all for now. Good luck with your trading.


Mike Bryant

Breakout Futures