Back Testing, Trading System, Big gains

One of the great features of StockFinder is your ability to back test your strategies. Be careful not to get caught up in the annualized gains, their not realistic of what you can expect. Instead, use an equity line and plot it against buy and hold on the market.

I've mentioned a few times that I'm looking into starting some type of investment fund. I wanted to have a good system that takes a lot of the guess work and arbitrary or subjective decision making out of the process. This particular strategy is a culmination of events that go all the way back to when I was first Knighted in the Worden Report (maybe 2003?). The system I'm about to show you a bit of has not been optimized at all as of yet. It also doesn't take into consideration 3C's effect on the selection of stocks and earlier entry and exit points based on objective 3C analysis.

This system is based loosely off my Trend Channel and is in the market-(as of now) 100% of the time, either long or short. This is where some optimizing will improve results. The watch list, which I'm putting together based on certain parameters, will also affect the results greatly. Here's a look at the system on DXO-(double long oil).



As you can see, there are only 2 signals for the entire year (keeps commission costs low LOL).

The second chart is a 1 year back test of my watch list that are what I consider to be stocks that will have a tendency to trend well.




The first equity line (green) is for the symbol-DXO and it starts the year with $100. You can see at the end of the test, there's a gain of nearly 700%, whereas the buy and hold of DXO (the bottom equity line) shows a massive loss of 88% to start with $100 and end with $12.

The second green line from the top is the watch list equity line, it produced a return for the year (real-not annualized) of approximately 245%. The 3rd line from the top is the same watch list buy and hold, which lost 28%.

The 4th line from the top (second from the bottom) compares the strategy to buy and hold and you can see the strategy outperform the market for the last year by a margin of nearly 330%. When tested against the S&P 100 for a year, it returned 234%!

These numbers are mind-boggling. Imagine a $100,000 portfolio turning into $234,000 in a year with very few trades!

This is one of several systems I'm testing and the results are all in that range, thus I'm very interested in setting up some sort of partnership fund. Email me if you have questions or comments.

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