Does the random skipping of trades affect the overall result of the strategy?

If you do not trust all these robots and trade with your hands the old fashioned way, then you are familiar with the situation when you were distracted from the monitor for a minute and missed an extremely profitable trade. You’re probably very sorry at times like this and angry with yourself and the distractions.

And how does the accidental skipping of trades actually affect the final result of the strategy? Today we will arm ourselves with a scientific approach and answer this question with a little research.

Initial data

For testing, I took a profitable ready-made Expert Advisor from the article about trailing stops, removed these same trailing stops and added a method that generates random numbers from -1 to 1.

I added the Counter variable to the EA parameters – it does not affect anything, but I will optimize by this parameter from 1 to 1000. Since the EA parameters will not change during the optimization process, only ours will affect the results of each run in the tester random number.

I also added the Level variable to the parameters, which will take values ​​from -1 to 1. This is the sensitivity threshold of the filter that allows trades to pass. Thus, if there are conditions for entry, but the random number turned out to be less than the Level, we can assume that the trader left at that moment on his own business. At Level = -1, no trades will be missed, at level 1, all trades will be missed, at level 0, about half of the trades will be missed.

This is how the Level value affects the number of trades:

The tests will use only major currency pairs – USDCHF, GBPUSD, EURUSD, USDJPY, USDCAD, AUDUSD. The tests will run from 2000 to the present day. Then I will analyze the 1,000 results obtained. In this case, I will do two tests with different Levels equal to 0 and 0.7. At the -0.7 level, approximately 15-20% of trades will be skipped.

Results

Below are the test results for each currency pair. After I received the results of 1,000 runs with the same parameters, but randomly missing a particular trade, I plotted a histogram of the distribution of returns for this sample of 1,000 tests.

USDCHF

Initial test:

Without missing trades, the profit would have been $ 4473. Total trades – 992.

Skipping 15% of trades:

As you can see, most of the runs were concentrated in the region of $ 3,800 – $ 4,700 profit, forming a kind of plateau. At the same time, the very basis of the distribution was located in the region of 2,000 to 6,000 dollars of profit. But in most cases, missing random 15% of the signals changes the profitability in the range from 3,500 to 5,500.

Skipping half of the trades:

If we skipped half of the trades, we got a range from -1,700 to 4,100. In most cases, this is from 1,000 to 2,500 dollars of profit, but there is a good chance of getting a return equal to zero.

GBPUSD

Initial test:

Without missing trades, the profit would have been $ 843. Total trades – 188.

Skipping 15% of trades:

Here we would have made between $ 400 and $ 1,100 in profit. The base of the histogram is $ -250 to $ 1,500.

Skipping half of the trades:

On average, skipping half of the trades would result in between $ -250 and $ 650. The full range is from -900 to 1,350 dollars.

EURUSD

Initial test:

Without missing trades, the profit would have been $ 6307. Total trades – 1696.

Skipping 15% of trades:

Average range is from 4,200 to 6,600 dollars. The maximum is from $ 1,800 to $ 7,800.

Skipping half of the trades:

Average range from $ 850 to $ 3,800. The maximum is from -1,700 to 5,200.

USDJPY

Initial test:

Without missing trades, the profit would have been $ 2,954. Total trades – 1638.

Skipping 15% of trades:

Average range from $ 1,400 to $ 3,600. The maximum is from -600 to 4,900.

Skipping half of the trades:

Average range from -100 to 2,100 dollars. The maximum is from -2,000 to 4,200.

USDCAD

Initial test:

Without missing trades, the profit would have been $ 6404. Total deals – 862.

Skipping 15% of trades:

The average range is from 4,000 to 6,500 dollars. The maximum is from 1,800 to 8,300.

Skipping half of the trades:

Average range from 800 to 3 800 dollars. The maximum is from -1,500 to 5,400.

AUDUSD

Initial test:

Without missing trades, the profit would have been $ 1,579. Total deals – 313.

Skipping 15% of trades:

Average range from 800 to 1,800 dollars. The maximum is from -400 to 2,400.

Skipping half of the trades:

Average range from $ 0 to $ 1,100. The maximum is from -1,000 to 1,800.

Conclusions

So, we have tested the major currency pairs and plotted profit distribution charts with a random skip of about 15% of trades, as well as with a skip of 50% of trades.

The diagrams clearly show that missing 15% of trades does not cause significant damage to the account. The average range of the distributions of returns in 70% of cases for all currency pairs was within positive values. At the same time, the maximum range when missing 15% of trades was in the negative profitability zone:

• for GBPUSD in 8 cases out of 1,000 or 0.8% probability;
• for USDJPY in 1 case in 1,000 or 0.1% probability;
• for AUDUSD in 2 cases out of 1,000 or 0.2% probability.

The rest of the pairs were within the positive yield. Accordingly, if you missed 15% of the signals of your strategy, then the probability that this will lead to serious negative consequences is very small. Therefore, do not beat yourself up if you overslept the signal or was busy with something else at this time.

As for the skipping of half of the signals, then everything is not so rosy here. The resulting minus on the account when half of the trades are skipped is in the negative profitability zone:

• for USDCHF in 8 cases out of 1,000 or 0.8% probability;
• for GBPUSD in 212 cases out of 1,000 or 21.2% probability;
• for EURUSD in 28 cases out of 1,000 or 2.8% probability;
• for USDJPY in 145 cases out of 1,000 or 14.5% probability;
• for USDCAD in 52 cases out of 1,000 or 5.2% probability;
• for AUDUSD in 115 cases out of 1,000 or 11.5% probability.

That is, all currency pairs in the test showed a fairly high probability of negative profitability when half of the trades were skipped. Therefore, skipping too many trades is not a good idea)

The test I carried out revealed a high probability of a significant deterioration in the characteristics of the trading system when a large number of trades were missed. Moreover, the more trades are missed, the more likely it is to receive a loss on the account as a result of trading.

It follows that when testing a manual trading system on historical data, you should be very careful about the time of entry and take into account your physiology. For example, it is unlikely that you will be trading around the clock, all day long. In addition, I suspect that at a certain time you will be eating and doing other equally important activities. Therefore, when testing, it is worth considering the most likely time of your stay at the monitor.

That’s all, bye everyone!

Take care, Michael

Forextraderportal.com

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