Evaluation and Stops

  • Jacinta ChanEmail author


The trading models must be periodically evaluated to trace common patterns in the profits and losses to look for methods to avoid unnecessary losing trades and to improve the timing of the winning trades. This will assess the fitness of the assigned parameters to the current market condition. The objective of the out-of-sample test is to confirm the trading instrument with the chosen strategy is the best choice. Another equally important consideration, money management is risk management with adequate capital. The most professional way to execute stop loss is to place stop order at the entry of a new position. If a stop loss of $6 had been used for N-CAMA′, the profits would have been 150 for in-sample period and 447 for evaluation period.


Periodic profit/loss evaluation Money and capital management Out-of-sample test Stop loss 


  1. Bessembinder, H., & Chan, K. (1995, July). The profitability of technical trading rules in Asian stock markets. Pacific-Basin Finance Journal, 3, 257–284.Google Scholar
  2. Brock, W., Lakonishok, J., & LeBaron, B. (1992, December). Simple technical trading rules and the stochastic properties of stock returns. Journal of Finance, 47, 1731–1764.Google Scholar
  3. Chan, J. (2005, March/April). Using time series volatilities to trade trends: Trading technique—BBZ. Australian Technical Analysts Association Journal, 31–38. Google Scholar
  4. Chan, J. (2006, March). Trading trends with the Bollinger Bands Z-Test. Technical Analysis of Stocks & Commodities, 46–52.Google Scholar
  5. Chan, J. (2011). Financial Times guide to technical analysis: How to trade like a professional. London, UK: Financial Times Prentice-Hall.Google Scholar
  6. Chan Phooi M’ng, J. (2018). Dynamically Adjustable Moving Average (AMA′) technical analysis indicator to forecast Asian Tigers’ futures markets. Physica A: Statistical Mechanics and Its Applications, 509, 336–345.CrossRefGoogle Scholar
  7. Fama, E. (1965). Random walks in stock market prices. Financial Analyst Journal, 16, 1–16.Google Scholar
  8. Irwin, S., & Park, C. (2009). A reality check on technical trading rule profits in the U.S. futures markets. Journal of Futures Markets, 30, 633–659.Google Scholar
  9. Lukac, L., Brorsen, B., & Irwin, S. (1988). Similarity of computer guided technical trading systems. Journal of Futures Markets, 8(1–13), 64.Google Scholar
  10. Olson, D. (2004). Have trading rule profits in the currency markets declined over time? Journal of Banking & Finance, 28, 85–105.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.University of MalayaKuala LumpurMalaysia

Personalised recommendations