How do you know if the model you’ve built is a good one? The first test is to eyeball the trading signals. In this model, the signals are fairly good. Overall the signals are generally correct, i.e., the buy signals are near valleys and the sell signals are near peaks. Next, right click on the Stochastic Inputs label, and select Modify Selected Prediction, then click on the Prediction Analysis Button. This displays a complete report on your model that you can print. The general tab shows the dates, the model’s error, the number of trades and trading thresholds. The Trading Statistics tab details the model’s profit and returns compared to a buy and hold strategy. The Trade By Trade tab displays each trade in detail. The Input Contributions tab shows a rough percentage of each input’s contribution to the model.
You may have other methods of determining whether you have a successful model. For example, examine the equity curve to determine if there are any big dips or if the model made all of its money in a single trade. Remember that even highly acclaimed traders don’t get every trade correct.
Refer to the help topic Troubleshooting Your Model – What to Do if You Feel You Haven’t Been Successful for more details on creating winning models.