Testing the trading system provides a detailed analysis of the causes of maximum drawdown and peak profits, analysis of a series of profitable and losing trades, etc. To form a money management strategy, you need to use the averaged values of the test results, laying the risks of a critical situation. Market anomaly is his behavior, which is reflected in the deposit curve, but does not have a clear explanation and the reappearance of the anomaly is unlikely.
- Important! The market anomaly should not be confused with a rare but recurring event. Anomaly is unpredictable and is one-off. Stable recurring events related to anomalies can deprive a trader of a deposit.
When analyzing test results, it is important to understand whether the value of the peak drawdown is an anomaly (for example, due to a major player entering the market, spoofing, etc.) or the nature of the drawdown is natural (for example, the drawdown at the time of release of statistical data ).
Types of market anomalies
- Technical anomalies:
- plugin (platform) error. Technical failure of the platform (problem with the triggering of orders), which led to a deposit drawdown. To eliminate errors, testing of the same trading system is carried out not only on different assets, but also on different platforms;
- broker problem. Failures (delay) of quotations, technical server problems, problems with orders can cause a deep drawdown;
- trading advisor error. A bug in the code that is triggered only when a certain situation occurs – a market anomaly reflected in the Bektest.
Not only the maximum drawdown is analyzed, but also the maximum profit in order to set real horizons on a real account, and not horizons derived from a random error.
- Market anomalies:
- inertia anomaly. The output of statistical reports may affect the quotes in a completely opposite way or not at all. Reason: incorrect interpretation of statements, not taking into account investors’ expectations and additional fundamental factors. For example, reducing unemployment in the United States (Non-Farm) does not always mean an increase in the value of the US dollar;
- holiday anomaly. Traditionally, before weekends and holidays, positions are fixed and business activity decreases. True, this rule does not always work and depends on the locality and duration of the holiday.
Dealing with the unpredictability of market anomalies is difficult. Therefore, novice traders are advised not to trade at the time of reporting, the risk level is up to 5% of the deposit amount per position and not more than 20% for all open positions. If the results of trading on a real account deviate from the test results, the trading system stops.