Monday, October 8, 2007

Test results for my system

I thought I should publish some statistics regarding my system. The system was build using a technical analysis software called WealthLab.

The system is build around the concept of trend following and as such uses moving averages with additional factors to determine the entry price. Once a signal has been accepted the system "ride" the trend as much as it can. This means, a trade can last from one week to several years. I know this sounds like a lot of time, but when the profit for a long trade can pass 1000% I think it is acceptable. As a precaution not to trade illiquid stocks, the system filter any stock with average volume less than 1,000,000 shares in the last 3 months.

Stop loss signal received if the price drops 10% below the entry price. For money management I use the "Percent Risk Model".

The system performed well on different markets but the market which performed best was the NASDAQ. I believe that even in a flat market, like we see this year with the NASDAQ, there are stocks which outperform and my goal is to find as many of them as possible. for example, watch SSTR on a weekly chart. The stock climbed more than 100% in two weeks. A move that was caught by the system.


I run a simulation using the complete NASDAQ Composite stock list (~3000 stocks) for the last 10 years.

The following parameters were used:

Starting capital: 1,000,000
Maximum risk percent: 1%
Commission: 0.01$ per share
Slippage: 2% of the base price

The raw trades (443 trades) where then passed to a Monte Carlo simulation application developed by the makers of WealhLab.

Here are some screen shots taken from the Monte Carlo simulation run.

Profit Analysis


Drawdown Analysis




Performance tab within Wealth Lab


Equity Curve tab within Wealth Lab


Drawdown tab within Wealth Lab

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