Backtesting 5-Min Binary Strategies Using MarketReplay (Poor Results So Far)

#1

Can anyone help me with this problem?

The Intended Study: I want to compare the final expiration values of Nadex 5 minute contracts to the closing prices of a Forex pair on the same time frame throughout a given trading day using MarketReplay data.

The Problem: The MarketReplay closing prices are not matching the final expiration values on the Nadex contracts.

A Little More Detail:

I am beginning to backtest 5 minute binary strategies using the MarketReplay Add-On in Ninja Trader. I have downloaded the data (Date Range) I intend to study and test with.

The charts are loading up fine, and I am watching the market move. (1 Minute / No indicators, just watching price action)

I have been comparing historical price data from MarketReplay to the expiration values based binary options using the results page and the daily bulletin from nadex.com.

The problem I am running into already is it seems the closing prices on the MarketReplay vs the Nadex results are quite different.

For example, here are the results I am getting from yesterday from USD/JPY (Jan 23 - 9:30AM Expiration) on 5 Minute contracts.

MarketReplay Result:

Nadex Settlement Value Results:

Notice how the closing price on the market is at 117.68 while Nadex records the expiration value at 117.89?

Again, I am only concerned with whether the Nadex contract price finished higher or lower at expiration than the closing price based on the MarketReplay data.

Any ideas to help me get the data to match?

Thanks for any feedback.

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#2

I’m not sure if you’ve accounted for this, but the Nadex settlement price is an average of the midpoints of the last 10 trades.

"Nadex Forex Contracts:

Take the last 10 midpoint prices in the underlying market
Remove the highest 3 prices and the lowest 3 prices
Take the arithmetic average of the remaining 4 prices and round to one decimal point past the point of precision of the underlying market"

Trading Questions Nadex

#3

I appreciate the response gcnish. You are right, I have not taken this into account. However, 21 pips is a fairly large gap do you agree? Do you think that if I could calculate the average of the midpoints on the nadex contract that it would mirror the price action of the underlying.

Do you or anyone else have any suggestions of a more efficient way to compare forex price action to nadex contracts at expiration?

What it boils down to is I would really like to learn an accurate method of backtesting nadex contracts. Forward testing in demo is a slow way to learn.

#4

A couple of other thoughts. You may try using the Clarity Price indicator in the APEX Toolkit on your underlying charts. It uses averages to calculate it’s price, but may still be off a little bit.

Also, make sure your charts are plotting in eastern time (EST)

#5

Make sure your computer is on Easter Time so your ninja is plotting in Easter time

Also Nadex is using reuters data feed your probably using FXCM or IQ feed. Also your plotting last price. So your forex data feed will have different pricing slightly and wont account for mid of bid offer so you wont be able to use market replay feature of ninja to get settlement prices.

Also using market replay on ninja wont help you back test 5 minute binaries as you need the strikes adn the prices those strikes where at when you got in and exited so its pure theory backtest the way your doing it.

They are 5 minutes 4 markets 11x an hour you can do 44 test in an hour live with accurate information.

On a side note: We are working on a backtesting chart feature called as we record ALL the data every single tick bid/offer strikes indicative and underlying on every single binary and spread contract. We have it working, we have to make it a bit simpler to use and figure out how to make it cost effective as its a lot of data to just stream out to everyone. Basically the data cost a lot to store and stream and we dont know what people are willing or even if they are willing to pay to get it as its not free for us…

#6

Darrell,

Thanks alot for your reply! You are correct, I am using FXCM data and I did not realize that Nadex uses reuters. And also I guess I have been attempting “theoretical backtesting” using this data. I have been using the open price of the data and plotting my strikes at the corresponding intervals. It seems somewhat of a poor mans way to back test but I do feel like it has helped me in some ways. If nothing else it has been extremely interesting watching the price action and logging a win/loss ratio.

I would be absolutely interested in any backtesting chart feature that you guys release in the future and would be willing to pay for the service. It would be an extremely valuable tool in my opinion as I am obviously practicing my nadex strategies using an imperfect system.