sleytus wrote:the problem is in the high and super-optimized values of the indicators
If the Equity chart appears linear and there are many trades that result in a slow, gradual increase -- then it is not over-optimized.
An over-optimized strategy would have an Equity chart with one or more large steps that account for most of its Net gain. These few, large steps from the past are rare events that may never be repeated again in the future. The intervals between the large steps are losing trades -- and that's more indicative of what the strategy will do in the future.
How does an equity curve look like really depends on the nature of your EA. If one's EA is a scalper that takes in lots of small profit and suffer occasional big loses, then I would expect the equity curve to have many incremental/steps increase and a few big dig in between these small incremental steps.
If my EA is a breakout, the opposite observations will be made, I'll have big/large incremental steps (with each breakout periods) with many small dips in between these big steps. Hence these large steps may not signify rare events that won't repeat itself (there again, we need to examine how big these steps we are taking about, normal breakout or black swan events).
Likewise a lot of people like to use high win ratio as acceptance criteria to search for EA, there again, we need to understand what are we looking for? A breakout EA tend to have "lower" win loss ratio (unless one really know how to use filters to eliminate those loses in ranging times). Cos a "normal" breakout EA trading "behaviour/pattern/equity curve" is one with a big win follow by many small loses, so the equity curve will have big/large incremental steps followed by many smaller loses in between these large steps. I said "normal" because that's how the market behave, normally a breakout is followed by a number of ranging days. Hence a "normal" breakout EA without good filters will then behave "normally" with low win ratio. But not all breakout EA need to behave this manner. As for me, I will add in good filters and hence managed to reduce those loses in between those ranging and hence my equity curve will look smoother (big steps followed by flat, cos I've managed to reduced loses during ranging times, as shown in the image attached).
![https://s13.postimg.org/rl2k28osj/equity_curve.png](https://s13.postimg.org/rl2k28osj/equity_curve.png)
So if anyone is searching for a better Breakout EA, one then need to add in extra slots with different LTF (linked them) and then let the Generator search and add in those filters in the available slots. A "good EA structure" has 2 main components
1) How to make profit (these are your trading rules for entry/exit for your EA to make money/profit
2) How not to lose money (these are filtering rules whereby you try to restrict your EA from entering into false signals that will deplete your profit).
So for those using Generator to search, make sure you have "enough" slots for components (1) and (2). If you are only relying on components (1) Trading rules to make profit, EA then to have lower PF cos it failed to eliminated false signals and hence gave away those previous profit earned. Thus my workflow or my EA structure will have these 2 component in place. And sometimes, I will have these slots and then let FSB optimise them (the results for the latest FSB version is far better than the past versions. There are more profitable EA from the optimising process compared to what I got in the past).
In conclusion, don't chase after some "ideal" equity curve without understand how should your EA behave in a market situation. We all agree that we can't win all the time, losing is part and parcel of the game but if we are chasing after a gradual and consistent equity curve, we are lying to ourselves, we are indeed then chasing after and looking for an EA that can keep winning consistently with little loses (probably we are then looking for scalping EA).
sleytus wrote:the problem is in the high and super-optimized values of the indicators
One last note -- backtesting is no guarantee of good trading results. There can be a big disconnect between backtesting statistics and how a strategy performs in a Demo or Live account. I think this is mostly due to the data -- backtesting uses bars (which are not real data), whereas Demo and Live accounts use tick data that arrive fast and furious many times per second.
Exactly, well said Steve. To believe in backtesting is liken putting a soldier in a simulated training courses and expected him to do as well in a real war event.
There are issues that aren't "reconciled" in a backtesting methodology using just a particular time chart data bar (unless A H4 time chart gets it's bar data also from the 1min bar data, then one can tell the price movement within a H4 data bar with greater accuracy).
Price spike in real market can't be translated to bar data. Can a bar data really tell you the price movement within the bar? Does the price hit the highest price 1st then go to the lowest price or did it go to the lowest price then go move to the highest price? This simple question can make a big difference between winning and losing for a EA in a real market and may therefore provide a possible explanation for the big disconection between backtesting results and live/demo results.