![]() ![]() In this example, this screen was designed to always pick five stocks. Specifies the number of stocks that passed your screen in each period. Lists the individual holding periods in your test along with the corresponding start dates. ![]() It also includes other summary statistics such as the average number of stocks held and more. ![]() Specifies the average return of your strategy and the benchmark during your test period, including the average return when the market was up and the average return when the market was down. But the more granular view broken down by periods also provides some very useful information.) (Of course, the benchmark's returns will show you how bullish or bearish the market was as well. This will show you if your test period was predominantly bullish or predominantly bearish. And 23 one-week periods where the S&P was down. In this example, there were 29 one-week periods where the S&P was up. Indicates the number of up and down markets (periods) seen by the market, i.e., the benchmark selected – in this case the S&P 500 - during your test period. Let's take a closer look at what's in each of these sections.ĭisplays the annualized returns for your backtest report. The screenshot shows the first six columns of the main backtest report. On the contrary, even some of the best strategies 'only' have win ratios of 60%, 70%, or even 80% - not 100%.īut if your stock-picking strategy picks winners far more often than it picks losers, you can trade your strategy with confidence knowing you have the highest probability of your next trade being a winner. Just because you have a great strategy for picking winning stocks, it's not going to preclude you from ever having another losing trade. And while it may start picking losers all of a sudden (now that you're using it, right?), it may also continue to pick winning stocks just like it had been doing over and over before. Why? Because it's proven to pick profitable stocks. On the other hand, what if you saw that a screening strategy did great year after year, period after period, over and over again? You'd, of course, want to use that strategy to pick stocks with. Sure, it might start picking winners all of a sudden, but it may also continue to pick losing stocks the way it always has. Why? Because it's proven to pick bad stocks. If you saw a that a stock-picking strategy did nothing but lose money year after year, trade after trade, stock after stock, over and over again, there's no way you'd want to use that screen to pick stocks with. Of course, past performance is no guarantee of future results, but what else do you have to go by? Once you've created a screen, you can see how successful that strategy has performed in the past, so you'll have a better idea as to what your probability of success will be now and in the future. But just because you narrow down 10,000 stocks to only a handful, doesn't mean you've picked the best stocks on the planet. Screening for stocks is the first step to becoming a successful trader. ![]()
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