I see these backtest reports all over the place, but I've never seen a publication that explains each line on a backtest report line by line. Does anyone know of a publication that has this info?
If you want to know everything about what is important in system testing read the book "trading systems that work" by Thomas Stridsman. It 's absolutely one of the best books on this subject.
Drawdown is important, but remember the adage "Your worst drawdown is yet to come." Consecutive losers are an important tip off as to whether or not you can stick with the system. It is useful to go to the trade by trade report and track each trade and imagine what you would be feeling. I think the most important stat, other than net profit and drawdown, is average winning trade. It's easy to kid yourself that some system that traded a zillion times over 5 years and produced some big profit number is the key to the kingdom. Then you see the ave winning trade is $10. My advice is don't bother with it, the results could easily be a big loss if you got just one tick slippage. Also it is crucial that a system's results are not skewed by a couple of humongous winners. Believe me, you are not going to hit those trades in real time. You will find some reason not to take them or you will take profits to soon or whatever.
Here's another thing to watch out for... I trade portfolio or basket type systems. These systems sometimes give more signals than you can reasonably trade. In looking at the results, you must have a realistic way to filter out the excess trades. And when looking at the equity curve, you have to eliminate trades in excess of those you could reasonably take. Which brings up a question... I'm using TechnifilterPlus which is a wonderful end-of-day system development program, but I would really like to find something that is better for portfolio or basket testing. Any suggestions? I looked at Wealth Lab, but it is slow on large databases. gs
ges, I use amibroker for backtesting and is really fast although I don't do basket trading I have met lots of guys that use it for that and they really like it. check with some of the people at http://groups.yahoo.com/messages/amibroker this is a very active board of amibroker users. wdbaker
Wealth-lab 3 which will be available is a few months will be designed to handle much larger numbers of stocks with greater efficiency. Runningbear
I belive that backtesting software is like Monday morning quarterbacking for a football. Shoulda, Wudda, Coulda ?? It helps but dont think you will find something that will unlock the key to Fort Knox. Be careful of all backtesting results.
I looked at Amibroker, but it was quite a while ago. I should probably look at it again. "Really fast" is relative. TF can churn through a huge database faster than anything else I've seen, outside of system written in C or some other compiled language. If I was more of a real programmer, that's what I'd do....but I'm not. gs