Read remarks from Market Wizard Ed Seykota on back-testing and this blog about back-testing by following the links embedded in this article.

(Backtesting Blog is an Amazon Associate.)

Last updated 02/04/09.

Tags: back-testing, backtesting, Ed Seykota

Click here to download the first issue of BackTesting Report free without registration.  

BackTesting Report helps you make rational investment and trading choices by giving you the results of rigorous testing of popular technical strategies.    It gives you the data without all the effort of backtesting yourself.

Excerpts from the report:

“Establishing a baseline of market behavior helps you tell if a strategy is doing well for good reason or if it’s just plain lucky.   For example, it may initially sound great to have an entry strategy that wins 55% of the time.   But if our baseline test wins 60% of the time, that entry doesn’t look so good anymore.   Likewise, a win rate of 30% might not sound like much, until you learn that the baseline was 25%!    The baseline sets the standard for performance.  This issue is about entry baselines and it focuses on the win rate more than the other statistics.”

…

“This report establishes the baseline for comparison with all other trading strategies.  This is a crucial step because you need a way to tell if a strategy did well when the market just happened to pull it along, or if the strategy really does signal timely entries and exits.    A good baseline shows what happens in the absence of a strategy.    Rather than exercise judgment on when to enter, the baseline strategy always enters when it doesn’t have a position and likewise, always exits after a pre-defined number of days.”

Please share this report as you wish.   You can email it, link to it, reprint it, or blog about it.   Please also include a link back to www.backtestingreport.com   and drop me a line so I can publish a link back to you. Thanks!

The actual link to the document is http://www.backtestingreport.com/BackTestingReportBaseline.pdf 

(This post and the associated document are licensed this under the Creative Commons License, Attribution 3.0. http://creativecommons.org/licenses/by/3.0/us/ .  I am the majority shareholder of Own Mountain Trading Company, the publisher of BackTesting Report. )

Tags: back-testing, backtesting report, baseline, linkedin, technical trading