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Strategies & Market Trends : Technical Analysis- Indicators & Systems
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To: Tim Fierro who wrote (2840)10/19/1997 11:30:00 AM
From: Richard Estes   of 3325
 
The idea of system test is not to try and set up a real to life situtation. Our tools don't allow that. We are in the biggest bull market, I could imagine. You should be looking for a system that you can trust, one that carries you thru the good times and bad. When a signal pops off, you have no way to know where the stock is going except the belief based on your testing that it will move. Your % of wins may mean you expect it to go in your favor say 80% of time. 20% are losses. Stops/system signals can keep losses down.

Now will 9 months of data do it, IMO, NO! I think of 3 years as minimum. Get every bit of data you can into your test. You want to see how it performed under all conditions. When you talk about bad stocks (losses), that might only reflect that the system did not react well to the conditions, present. You need to look at each trade and determine would I have made this one.

The bid/ask spread is present on the nyse too, just not as pronounced. Remember you won't get real life. But a relative goodness of your system. In real life, do you put X dollars in a stock and reinvest your winnings in same stock to compound results?

Try to work on disecting the results of tests, looking for a sucessful system in all phases of a stocks cycles that you will buy when it says buy, or sell when it tells you to.
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