In the first and second parts of this series, we both analyzed the code for developing a winning strategy and also showed how we can test this in TradersStudio. Now that we have run our simulation, we need to analyze the report to see how it performs overall. The reports that are generated are in an amazing level of detail so the best part is that no matter what the strategy, you’ll be able to analyze all aspects of it to figure out what might be its strengths and weaknesses. This last and final section of this series will show you how to do just that.
In the first part of this series we took a look at the code for a winning strategy that we said would bring about returns that were 100x better than the traditional buy-and-hold strategy. This almost sounds too good to be true in a way as the buy-and-hold strategy is often recommended as being the best way to make consistent returns on the market. However, as we will show, the code for the strategy that we provided for you will make consistent profitability from the years 1985 until 2009.
One of the best ways, I feel, to learn a new system is to explore it in depth. In order to learn something new, it’s often advisable to see a practical example of that which you’re trying to learn in action. In this post, I’d like to discuss how we can use TraderStudio to test a strategy that significantly outperforms buy-and-hold. This system is so profitable, in fact, that it outperforms buy-and-hold by a factor of 100x. Intrigued? Read on.
This strategy ships free of charge with TradersStudio and is called TSStockTraderLong2006. We will test it against the NASDAQ100 as evidence that it has consistent profitability.
This second part of our tutorial series will focus on using TradersStudio to handle split-adjusted data. The first part focused on why this was a problem (primarily how and why it’s handled in automated strategy testing). In this section, I will explain how TradersStudio helps you, the trader, backtest strategies properly and taking into account these issues.
In TradersStudio, the split-adjusted, dividend-adjusted, and unadjusted data is used in our analysis. The split-adjusted data and dividend-adjusted data allow TradersStudio to calculate where any entry point for a stock trading strategy would occur including the issues related to price breakouts with dividends. The unadjusted and split-adjusted prices are used to calculate the real entry price for every single trade. This information is used in our analysis so that position sizes can be correctly established. TradersStudio also includes a split and dividend report so it can be determined how these issues affect each trade and a historical report is generated so the results can be analyzed.
I’m beginning a series on how all traders can use TradersStudio to their maximal advantage. I figure this has a couple of purposes: the first is to show fellow traders some of the tips and tricks to developing amazing systems, and the second is to show how TradersStudio fits into the broader picture of trading. TradersStudio is, after all, a tool to help traders understand how to develop and test real-world strategies. Showing a feature of this product will hopefully both spur stellar trading ideas in you and also show you how to implement those within the program.
But before I show you how TradersStudio solves all these problems, I must first show what the problems are in developing winning automated trading strategies.