Backtest

Notice the following while backtesting:
Post-project comments in bold.

1. A typical winning trend system (generally most profitable strategy) will subject a trader to large number of small losses and only a few big winners. If risk position sizing or psychology falters how? Understanding this and inevitable drawdowns is vital for someone to sit tight to plan.

2. Without leverage at all and using 100% of capital, such a system will subject a trader to 50% max drawdown within few years. Imagine always leveraging just 2X, what will be the unescapable fate? Either dont leverage at all or should you leverage adaptively? To chew.

3. Even for such profitable methods, commissions can eat between 10-50% of final profits. What if the method chosen is not good and doesn't even yield enough profits to cover commissions? Development goals of System Z is to balance max profits vs min number of trades.

4. The inherent noise level of a stock doesnt change just because you trade it short term instead of long term. The short term position is exposed to larger odds of price going against it. The bigger cutloss required reduces reward vs risk. Sitting tight will make most in trending markets, not in-out.

5. Depending on an investor skill of interpreting market cycles, buying and holding can often yield better profits than trading a counter, without the hard work of trading in and out. Combine Public/Institution/FA analysis with TA to be technical investor? To chew in Project P.

6. The shortterm method of buy at channel support and sell at channel resistance is not a good strategy. It only works in final phase of bull where prices go up steadily, even then profit gains is small compared to riding full move from inception. Adult scalper. Miss big move due to short focus.

7. Most breakouts retrace to test breakout price. If you chase, you can almost always get it cheaper later. If don't chase, you will miss entirely the rare (and big) runaway trend without retracement. Results favour chase but whichever way more important is consistency.

8. There is no "best" method as 2 methods applied to 2 different counters can give no clear winner. Should we adopt a method that yield consistent good profits over broad range of counters? Or instead one "perfect" just for a few counters? Of course, one with evenly spread results for stability.

9. Systems live. They grow, mature, die, revive. Some systems that work for long time, equity curve will break major support one day and go downhill. Systems built on general laws of price action less susceptible but still not infallible. Before that, note signs and develop a successor system.

10. The only time when it is easy to make profits is last 10% time of a bull market. Trades yield big gains with little cumulative drawdowns and paper losses in between. Thats when you see many friends getting interested in stocks.With public interest, its time to make hay while sun shine.