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How to back test a trading scenario

How to back test a trading scenario

Author: EricBBigham , Last Modified, 2017-10-08

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How-to-back-test-a-trading-scenario

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It was a wee while ago now that I back tested the Apple share price. I wanted to see if this custom share trading scenario planner would generate any sell signals. As expected, this stock was so good, it didn't.

I used a custom built stock price back-testing model. When I ran the numbers it basically suggested that Apple was essentially a fundamentally strong company, but perhaps technically weak. For a Position Trader, this is generally good news as it is a buying signal.

This does of course assume that we judged the Apple Stock to be a good long term bet. A good assumption, by the way, as this signal basically tells us that Apple stock is a strong buy, because it is more of a fundamental bargain yet technically not so, from a value investing standpoint. And yes, a good trader, I believe should be cognisant of both trading styles.

The difference is down to fundamentals and your view on "Value" versus "Technical" investing. I believe Apple is a solid company with seemingly endless opportunities for growth, yet we are reminded that its' health at least from a tax perspective, remains so only at the whim of certain European regulators as long as it chooses to operate from within the confines of any regulated European hub.

The big fear for the Irish is, or should be, that Apple does not decide to up sticks and relocate its affairs and the thousands of well paid high tax paying jobs with it, to friendlier lands. BREXIT BRITAIN Anyone?

EricBBigham

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Equities Trading Education video

This video demonstrates a back testing strategy process to understanding the profitability and risk of picking equity stocks

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