Forex-Jedi replies to: Using ATR incorrectly during back-testing :(

I think I just made a rookie mistake so hopefully this thread is in the appropriate place. *sigh*

So I just finished a very comprehensive manual backtest and recently started trading it live. To my horror when comparing my notes, I noticed that the ATR figure I was using on a daily (live) basis was different than the one I used in my backtesting. It appears the ATR indicator included in everybody’s basic copy of MT4, continually updates its average in real time – even on a daily chart. I assumed I was getting numbers on the previous X amount of days, not the previous X+today. So now my meticulous, beautiful back-tested strategy is suspect. Essentially I was using a volatility crystal ball on the last day of every averaged period. This would be no big deal if I was using 50 periods, but my sample size is much smaller.

What should I do? (besides kill myself)

On a shorter ATR daily time frame, is it standard practice to not include the present day in your system or do people just include it and pay no attention to the fact that at the start of the U.S. trading period, only 1/3 of the current day’s volatility is being averaged into your ATR sample.

Thanks for listening.

I need a drink…….

SD

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