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Backtests

Our backtester allows you to backtest technical indicators on stock universes (S&P 500, Russell 1000, Russell 2000 and Russell 3000) as well as on single stocks.

Stock universes are survivorship-bias free. In other words, we use actual historical compositions of the indices (with a single change per year - on 30th June each year) and delisted stocks are included in our stock sample.

Stock prices we use are adjusted for dividends and splits (and any other corporate actions). We use data from 1 June 1996 to 31 December 2014.

User can choose from many technical indicators and set parameters for those indicators. If a user chooses 2 or more technical indicators they are joined by AND. Thus, all the conditions have to evaluate to TRUE at the same time for the set of indicators to evaluate to TRUE.

Users can add TIME-EXIT and STOP-LOSS to the EXIT conditions. If any of those 2 conditions evaluates to TRUE, user exits. Thus, TIME-EXIT and STOP-LOSS are joined by OR.

All the trades are executed at the close (based on the signal from the same day). We assume that trader evaluates the signal few minutes before the close and acts on it at the closing price. Default one-way transaction costs are assumed to be 0.05% and can be adjusted by the user. We do not account for any bid-ask spread, as we assume the trader is able to use Market-On-Close orders and avoid bid-ask spread (which might sometimes be problematic especially for small cap stocks).

Once you have finished a backtest, best way to evaluate the results is to look at Calmar (annualized return/maximum drawdown) and Sharpe (annualized return/ volatility) ratios. Both compare return with risk and are the best measure of consistency of a strategy. Strategies with Sharpe ratio > 1 can be considered successful (obviously, the higher, the better).

It is also important to compare the strategy with a benchmark which you can do visually in our OVERVIEW tab. We included 2 benchmarks - SPY (S&P 500 ETF) and SPY EQUAL WEIGHT (S&P 500 with equal weights of stocks in it)

Learn more about Elite features.