VP back testing

Hi all,
I just started reading this thread last night, and thought I would join. My partner and I have been trading Forex with Vantage Point for the past year with a tremendous success, and we have been using a beta version of 7.0 for about a month.

Here are my notes on the new indicators and the improved performance.

There is a new long term indicator to go with the short and medium term indicators. Also the strength indicator was changed to be a predicted very short (3 day) term indicator that follows the neural index exactly. (so if you use the 6.4 strength indicator in your trading, then be advised it will now respond differently) Both of the new predicted average indicators work well with perfect order strategies. There are three new momentum indicators, each predicted one day ahead. They work great, but for some reason, they are not yet available for export so back testing with the momentum indicators has to be done manually. They did change the history export to provide 5 years of back data, but beware you can slow everything to standstill if you try to open too many history files at once.

The big news is that they increased the number of markets that are used for intermarket prediction from 9 to 25 and now calculate using the midpoint between the high and the low for the day rather than the close of the day(which is meaningless in the forex market.) I did an accuracy test on the all the FOREX markets for the past 2 years and got an overall accuracy of 81.6% for all forex markets combined. (6.4 gives 74.3% by the same metric)

As for trading strategies, we found that the best way to use Vantage Point is to match the VP indicators (or any combination of indicators) with either a trade entrance, exit, or stop loss strategy for a given currency pair. Markets change, VP indicators do not, so find a setup that has worked very well for at least six months (12 months is better) with a certain currency pair and use it as long as it performs to a level acceptable to you. (We look for trade strategies that give a 10/1 win loss ratio (WLR = Pips won/Pips Lost) and only trade strategies with better than a 5/1 WLR.

I am posting one of our strategies here that we published elsewhere. I developed it to see if I could find a strategy that would take advantage of the new stochastice indicator. In this case, I use the stochastics predicted one day ahead as an advance notice of over bought or over sold, I use it as an exit strategy in a range trading market.

If you decide to try this strategy, please realize that I developed it for the EURCHF market only, and every rule in the strategy was added to maximize the WLR. I will only trade this on the EURCHF, and I will discard or modify it when it falls below a 12 month 5/1 WLR.

EURCHF
1 .Enter at the “close” price when the “Predicted Medium Term Difference” crosses zero in the direction of the trade, and when the “Predicted Stochastic” is between 30-60 for long and 40-70 for short.
2. Set and Reset the stop loss daily to right at the “Predicted Next Day High” or “Low” (whichever is applicable).
3. Exit at the “close” price when the “Predicted Stochastic” moves above 70 for long or below 30 for short or when either the “Predicted Next Day High” or the “Predicted Next Day Low” predicts the next day in a direction against the trade

Here are the 12 month statistics on it. Please note this trade setup only occured 8 times in 12 months.

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The trade calls for the PStoch not the trigger. See the attachment. (This was the one time when two trades occured close enough in time to see them on the same chart.)


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Interesting you should ask this. I read a very good book called getting started in technical analysis by Jack D. Schwager and he has you back testing any strategy back two years over more than one market to account for market changes.

I spent six months and counless hours testing vantage point solutions with this standard of testing, and I did not find any of the types of high performance trades I knew vantage point was capable of producing. What I finally realized was that since vantage point is actively predicting the market using neural networks and inter market analysis, the indicators should be treated differently than normal passive indicators that react to price alone.

What I have found is that each vantage point indicator best predicts markets that have a certain voulatility. Markets are always changing. Think of each vantage point indicator as having a "sweet spot". When a given changing market slides past the "sweet spot" of a vantage point indicator, then that vantage point indicator starts predicting the market with what sometimes appears to be uncanny accuracy.

Once I realized this, I started testing for it, and I found that there were lots of trading scinarios that were amazingly accurate for 9 to 18 months(sometimes more) and then market conditions would gradually change and they would lose their effectiveness. Often in the middle of the cycle there can be a huge win/loss ratio(WLR). So we started looking for trade scinarios with a 6 to 12 month trading record of better than 10/1 (WLR)(total pips won/total pips lost) and then we trade these scinarios assuming that they will still be effective for a while, but expect them to slowly lose their effectivness.

We are looking to keep our actual trading above 5/1. The trade I showed earlier is at >18/1 and is one of our current trades. You are only limited by your imagination and your ingenuity to match vantage point indicators (single or combined) to a market. What you are looking for are indicators that best predict the three components you need for a trade, namely the entry, exit and daily stop loss (or profit protection). You can use different indicators or combinations of indicators for each trade component.

For my back testing, I enter the trade at the historical close of day price and play the scinario out. for those who have never done back testing you simply play act the trade as you would have had you recieved the daily vantage point data real time. It is best to program the backtesting using excel or something similar to get an unbiased answer, but you can do it by hand. Beware, if you do it by hand, you have to be brutally honest in writing down the trades or you will end up with falsly good data and find that out when you start trading the scinario.

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this is form VP site
Predicted MACD is another way of using moving averages to predict market changes. Predicted MACD charts the difference between two predicted exponential moving averages and uses another exponential moving average of the MACD as a trigger for trading signals.

Predicted MACD (PMACD) predicts the moving average convergence divergence (MACD) one day ahead. MACD is a trend-following momentum indicator calculated by subtracting a 20-day exponential moving average from a 10-day exponential moving average. MACD Trigger (Trigger) predicts the MACD trigger one day ahead. The MACD trigger is calculated as a 9-day exponential moving average of the MACD. When the Predicted MACD line crosses below the Trigger line, this predicts a possible reversal of the current uptrend to a new downtrend. When the Predicted MACD line crosses above the Trigger line, this predicts a possible reversal of the current downtrend to a new uptrend. Another crossover indicator occurs when the Predicted MACD crosses above or below the zero line. Predicted MACD can also be used as an overbought/oversold detector when it pulls away from the Trigger, suggesting the price of the market may be due for a correction that will bring the averages back together. Predicted MACD can also be used to spot underlying strength or weakness when its movement diverges from the movement of prices.