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System Tester and plotted indicator giving different entries/exits
Rank: Newbie
Groups: Registered, Registered Users, Subscribers Joined: 9/13/2010(UTC) Posts: 7
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Newbie here...
I've been playing around comparing long term indicators like Pring's KST with a 200 day ma envelope. I added the long term KST as an indicator with a 120 day ema. I plotted vertical lines at the crossings. Then I created a System Test using the same formula (cut and paste) and the cross function. For example the buy order is " cross(Fml( "Prings' Long Term KST EMA"), MOV(Fml("Prings' Long Term KST EMA),120,E)). Sell order is reverse.
Does anyone know why the plotted indicator would generate different entries than the System Test? I have several additional trades identified from the System Test that do not correspond to crosses of the indicator and its ma.
Confused??? thanks in advance
Glen
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Rank: Advanced Member
Groups: Registered, Registered Users, Subscribers Joined: 7/25/2005(UTC) Posts: 1,042
Was thanked: 57 time(s) in 54 post(s)
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Hi Glen
This is an issue that catches virtually every newbie. The cause is that, unlike most other moving averages, an EMA uses ALL historical data to generate a result. Do some basic research on EMAs and you'll see why that is. In practical terms what it means is that you should either use the same amount of data in a system test or exploration as you normally use for an open chart. As a rule of thumb I suggest that five times as much data as the longest EMA Periods parameter be available for an exploration. Where you have one EMA nested inside another then "times five" should be applied to the SUM of both Periods parameters. With a systems test this amount of data should be available prior to the starting point of the test. One way to load more data without including that extra data iin the test is to add a "date filter" to your entry signals. The down side of adding more data is that execution speed slows down, but the upside is that the results are much more accurate.
Roy
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Rank: Newbie
Groups: Registered, Registered Users, Subscribers Joined: 9/13/2010(UTC) Posts: 7
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Roy,
That makes sense--I'll try to sync the chart period and the system test period to see if I can get the trades to coincide. Thanks for the help.
Glen
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