How (not) to Set Up Profit Target and Stop Loss in SeasonAlgo – 3/3

In our previous articles we explained why it is not possible to use historical patterns for determining Profit Target and Stop Loss. In this article we will focus on how the SeasonAlgo can help us with setting PT and SL values and how we can test them.

The SeasonAlgo offers classic Backtest which calculates the success rate and profitability of a given spread for each year within the entire range of years with available historical data. In some cases, the historical data may cover up to 60-year periods! Backtesting also provides information on average performance for the last 5, 10, 15, 20, 30, and more years.


Figure 1: Backtest in SeasonAlgo. Source SeasonAlgo

This information is very valuable and enables for example to determine the SL necessary for reaching the average profit within different historical periods.

However, the SeasonAlgo offers one more method of backtesting. It is the Advanced Backtester which is based on the Walk Forward Analysis. This kind of analysis is often used by traders who develop their own automated trading strategies.

Employment of WFA is absolutely unique in commodity spreads. At the moment the SeasonAlgo developers introduced the pilot version of the Advanced Backtester. However, even the pilot version offers great opportunities for setting SL and PT in trading commodities and commodity spreads. Namely, the module allows setting of various ways and values for calculating SL and PT for a given spread. The performances achieved via various settings can then be compared with each other. The SeasonAlgo enables to display this comparison in a single comparative table which clearly shows which setting proves the best performance.

seasonalgo-advancedbacktester-srovnavaci-analyza Figure 2: Results of comparative analysis of two commodity spread strategies performed in the Advanced Bactester module. Source SeasonAlgo

Furthermore, these results get also displayed in comparative charts with equity curves of all compared strategies.


Figure 3: Comparison of equity curves of spread strategies tested by the Advanced Backtester. Source SeasonAlgo

For the present, the Advanced Bactester module is in its pilot version. The SeasonAlgo developers are now working on its new version and there is a lot to look forward to. However, even the pilot module functions are absolutely unique.


By today's article we completed our series on (non)setting SL and PT in the SeasonAlgo platform. You can see that the Backtest and the Advanced Backtester tools are absolutely unique in trading futures and commodity spreads. If used effectively, they can significantly improve your trading results and smooth out your equity curve.

Should you want to learn how to trade commodity spreads differently than traditionally taught, you can take part in our spread trading courses. For getting more profound knowledge of all functions of the SeasonAlgo platform, you can purchase an online course or join a group or individual course. For all these courses, you will be entitled to 10% discount on the SeasonAlgo use. All the courses can be taught remotely via shared screen.



Previous chapter: How (not) to Set Up Profit Target and Stop Loss in SeasonAlgo – 2/3

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