My backtested system consistently beats the S&P500

Discussion in 'Professional Trading' started by StockTrader1985, May 8, 2007.

  1. Hey guys,

    I usually stick to trading currencies, but a few days ago I decided to run a backtest on a system that's based on value investing. Using objective criteria over the first 100 stocks that fit the criteria, I ran the backtest over every year from 1998 through 2006, annually. Although I have saved the results in an excel spreadsheet, here's a quick breakdown of the results:

    1) My system returned an average of 11.98% over almost 9 and half years, while the S&P returned an average of 4.64% over the same period of time

    2) My total return over the period is 187.46%, while the S&P returned 52.75%

    My question is, how do I verify that this backtest is legitimate? Are there statistical tests that I can run to ensure that the system's success would also apply to today's markets?

    And lastly, if I am confident in my system, how do I setup a managed fund so that I can trade other people's money?

  2. Please wait while the villagers gather their torches.
  3. what's that supposed to mean?
  4. Mvic


    I recall that "evidenced based technical analysis" had a great section on back testing than anyone who goes that route will find worthwhile checking out.
  5. LOL

    Be honest with yourself, if someone came to you with that same pitch and asked you for money, would you even consider it?
  6. Test your system for 5 years with your own real money, then people might consider giving you anything at all.

    Nobody's going to give someone w/ a system money if it's not proven w/ real money already.
  7. alright, then ignore my second question, just answer the first if you can (help with statistical models that can verify the legitimacy of a backtest)
  8. OK forget I asked that second question

    Please help me with the first question if you can. Any of you math dudes out there, are there any statistical tests that can be applied to verify the legitimacy of a backtest?
  10. Tums


    do you understand the term "Form Fitting" ?
    #10     May 8, 2007