LearnTA: BackTesting a Systematic Trading Strategy

4 comments Written on June 18th, 2014 by
Categories: Premium

Let’s build a system. Where we have well defined rules for entry, exit and position size and we check the performance of that strategy historically.

Many of you are familiar with technology. But I’m going to try and make it really simple. Let’s take a moving average strategy:

  • Buy when the stock’s 20 Simple Moving Average (SMA) crosses over the 50 SMA.
  • Sell (and go short) when the 20 SMA crosses below the 50 SMA.
  • Use only 100 shares at one time.

Simple enough, we should think. But how has such a strategy performed in the past? Here’s the “eyeball” approach:

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About the Author:
The man behind Capital Mind. Deepak is a co-founder at MarketVision, a financial knowledge company. Deepak also provides data research and consulting services, and now lives in Bangalore. Connect with him at deepakshenoy@capitalmind.in.

4 comments “LearnTA: BackTesting a Systematic Trading Strategy”

I am loving these ones on technical trading. I wish these are more frequent.

I would personally like to see more detailed articles on fund allocations (how much of your total do u risk at a time), what are the ways of calculating risk, and ways of linking risk to % allocation (or other such factors), a rough way calculating the risk (uni-directonal trades, or combinations with options etc).. big list, yes ;o).

I am also wishing you’d bring your data product sooner. Obviously you havent told us what its going to look like, but I was hoping it would be one place to access all the data for all the data related articles you have publishing so far in the blog (like the IIP, CPI, WPI, FII inflows etc etc). That might be very useful as well.

Nice ideas! I’ll consider each and post on them :)

On the data front, we’re trying to build one. (Quietly, go to http://devdata.capitalmind.in/ and click on dashboards) But we’re being a little slow mate, apologies. Working through technology!

downloaded the software…its asking for a key!

Yes, you should be getting the key in your email…they will send it directly after you download it.