HOW-TO: Compare Different Strategies With Strategy Tester

My good friend Moses emerged from the cloud and declared “I have beaten the Nasdaq 100 by 1,100% over the last 24 years.”
I double and triple-checked his numbers, and goodness me he was right.
“How did you achieve that Moses!” I exclaimed.
“It was achieved using the application of mathematics and technical analysis” Moses retorted.
“But what did you do specifically,” I asked.
“I managed to avoid all the major stock market crashes and entered the Index ETF lower than when I sold it. This compounded my long-term gains tremendously” he cried.

MOSES (Market Outperforming Stock ETF Strategy) is of course my affectionately named TradingView Strategy Pine Scripts/Algos.

TradingView the New King Of Backtesting
I have been working on backtesting systems for the last 14 years. I have used many competing services, but TradingView is my new favorite tool.
Why?
TradingView has enabled me to backtest many scenarios using their excellent Pine Script. I am not a developer, but Pine Script is super easy.

Backtesting & Strategy Testing Takes Time… But TradingView Makes it Quicker.
Creating a strategy that tests for solid results takes a lot of time and effort. But don’t get disheartened. Start with indicators you believe in and test them. Do they really work? How often, what is your success rate. How long is each trade? How often do you trade? What is your drawdown? What is your Sharpe & Sortino ratio?

Luckily TradingView makes this process really fast, the speed of calculating the results of a test is mind-blowing. Seriously, it’s a platform that can perform 5, 6, 7, 8 strategies side by side over 24 years in the blink of an eye.

How did Moses Perform?
I have 3 MOSES strategies which you can see on the chart. All three beat the Nasdaq 100, but one really beat it hard. The “Buy on Bull Sell on Bear” strategy made $2.88 million on $100K invested in 1997, vs. $1.76 million for a “Buy and Hold” strategy, a 1,100% difference on $100K invested.

This long-term performance was with only 12 trades in 24 years with a 67% success rate. How do I know this? TradingView tells me in its strategy tester reporting.
Moses tells me many things:

• When we are in a solid Bull Market (Green Dots)
  
• When we are in a Bear Market (Red Dots)
  
• When we have a Shock to the Market (Shock Label)
  
• When we have a Catastrophic Event (Red Catastrophe Label)
  
• When to buy back in early, before the full bull market resumes (yellow dots)
  

Thanks to TradingView

Thanks to TradingView, I have a platform where I can rapidly test ideas and see if they work in the past.
I can check to see if a new fancy indicator really works or if it is just hype. (95% are hype)
If you are not backtesting strategies, then how do you know if they have a chance to work in the future?

Walking the Path
We all start as beginners. We think it is easy to make money. Then we experience a large crash and we lose a lot of money. Then we leave the market. If you persevere, you will try to build your knowledge and experience. If you go 23 years down that path, you realize that system and strategy development using backtesting is essential to making repeatable money.

Strategy Development Advice
“You can try to out-compete the hedge fund algorithms by day trading, but that is near impossible. You cannot out-arbitrage a supercomputer.”
You can, however, develop your own strategy that works over weeks, months, or years, and you can really make good profits.

Notes on the Chart
I run 5 scripts, 3 Moses Strategies + 1 Buy & Hold strategy for comparison (lower panes), and the MOSES Signals 2.0 in the price chart.
The chart is Weekly and from 1997 to today.

Note on Strategies.
Systems may not work in the future as they have worked in the past. There is no guarantee of future returns. Moses is a long-term strategy that works over years, not a day trading strategy. Moses worked in the past on major US and European stock market indices, it does not work with India or Chinese markets, no Strategy is perfect, not even Moses. Moses scripts are private.

Follow me if you like the post, and if you want to see my next post, the “10 Commandments of Moses” 😊

Any questions you have, let me know in the comments.

Barry