{"id":4698,"date":"2020-05-14T10:39:24","date_gmt":"2020-05-14T10:39:24","guid":{"rendered":"http:\/\/joapen.com\/blog\/?p=4698"},"modified":"2020-05-14T10:45:06","modified_gmt":"2020-05-14T10:45:06","slug":"backtesting-tips","status":"publish","type":"post","link":"https:\/\/joapen.com\/blog\/2020\/05\/14\/backtesting-tips\/","title":{"rendered":"Backtesting tips"},"content":{"rendered":"<p>I do this list of tips so I review before I do some back-testing analysis.<\/p>\n<h1>main questions (from John Bogle)<\/h1>\n<ul>\n<li>What is the rationale or hypothesis?<\/li>\n<li>What is the empirical evidence?<\/li>\n<li>What are the implementation results?<\/li>\n<\/ul>\n<h1>Tips to remind<\/h1>\n<ol>\n<li>Do a test of your system with 2008.<\/li>\n<li>If you look for correlation, you probably will find it, it does not mean that it will work in future.<\/li>\n<li>Test in not the best conditions and compare with other systems of<\/li>\n<li>Check volatility, tests on periods with low and high volatility is useful to get conclusions.<\/li>\n<li>Track the results in a word document with screenshots of the work done, the variables you touched and the specific results.<\/li>\n<li>Prepare set of 5 to 10 stocks for the back-test, track the results of all these stocks.<\/li>\n<\/ol>\n<h1>Typical pitfalls<\/h1>\n<ol>\n<li><strong>Survivor bias<\/strong>: you are not adding the companies that have not survived.<\/li>\n<li><b>Look-ahead Bias<\/b>: you have all the data in front of your eyes and can make trades according to that data, this provokes you get a false understanding about the behavior of your system.<\/li>\n<li><strong>In sample bias<\/strong>: you use a sample data that is always the same or similar, so then your system adjust to this sample and lose effective.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>I do this list of tips so I review before I do some back-testing analysis. main questions (from John Bogle) What is the rationale or hypothesis? What is the empirical evidence? What are the implementation results? Tips to remind Do a test of your system with 2008. If you look for correlation, you probably will &#8230; <a title=\"Backtesting tips\" class=\"read-more\" href=\"https:\/\/joapen.com\/blog\/2020\/05\/14\/backtesting-tips\/\" aria-label=\"Read more about Backtesting tips\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[105],"tags":[],"class_list":["post-4698","post","type-post","status-publish","format-standard","hentry","category-trading"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Backtesting tips -<\/title>\n<meta name=\"description\" content=\"I do this list of tips so I review before I do some back-testing analysis. main questions (from John Bogle) What is the rationale or hypothesis? 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