Last update: August 2021
I wanted to blame someone, but I knew I couldn’t blame the coaches at Tackle for picking these stock setups. I could only blame myself. Let’s face it, I was just not good at trading directionally […]
Justin Driskell —
Hey #TeamTackle, Justin Driskell here.
Some of you may know me from the Clubhouse or have seen my name in the Halftime Report or an evening show. To be brief about myself, I’m 28 years old, married with two little boys, and I’ve been trading since April 2018. Over the course of the last few months, I’ve put myself on a few projects to backtest the Scouting Reports to see just how successful each of the picks were. Using posted triggers, stops, and targets, I developed some rules and backtested how well the stocks performed and began journaling the data. Some of the stocks never triggered, some stocks got stopped out, some hit the target, and some went so far past the target that my trail stops had trouble keeping up. This blog will be the first in a three-part series about why I started these backtests, how these backtests have shaped my own trading, and what I’ve learned.
Let’s start from the beginning, shall we? It started with a long hard look in the proverbial mirror. I had to admit to myself that something was wrong. Every Sunday, I would sit down at my computer, sign in to Tackle Trading, and run through the Scouting Reports. I’d check out all the picks and find my favorite ones, determine my strategy of choice, and set up potential trades for the coming week. Now’s time for my confession, though: I wasn’t successful using the reports.
I wanted to blame someone, but I knew I couldn’t blame the coaches at Tackle for picking these stock setups. I could only blame myself. Let’s face it, I was just not good at trading directionally and the majority of the trades I set up off of the reports were directional trades (long calls, long puts, debit spreads, etc). I wouldn’t say I was horrible at delta trading because I wasn’t exactly blowing up my account, but I’d make a little bit of money than lose a little bit and my equity curve was just as neutral and boring as the RUT has been since February (thank God for condors).
I journal my cashflow trades separate from my speculation trades so I can see if one system isn’t performing correctly. My cashflow was basically lining up with my expectations but my speculation trades… eh… not so much. So now I knew what area in my portfolio a problem lied. Should I just give up speculation trading and switch 100% to cashflow. I could, and I’d probably do really well, but it didn’t quite fit my personality. I need at least a tiny bit of excitement in my trading, even if it is a small portion of my account. I just needed to figure out how to fix it.
I’m not one to say, “Well this didn’t work for me. I quit.” I’m the type of person who likes to fix things, which seems fitting because I work on cars for a living. Whenever diagnosing a problem with a vehicle, especially a problem that I’ve personally never seen before, it requires a bit of patience and research. What system on the car is being affected? Do I understand that system and how it works? I’ve personally mentored new automotive technicians myself and the first thing I tell them is that in order for them to be able to proficiently diagnose a problem on a particular system of a car, you must first understand how that system works, or else you will just be guessing at the solution. Here is where the research comes in. You know… the boring part. You got to read about that system to learn how it works. Cars are changing every year (much like the markets), which requires you to stay up to date with the latest technologies. Once you understand how the system works, you can then better understand where the problem lies, then ultimately fix it. So much like the automotive world is your trading system. You need to first understand the system before you can properly diagnose your own errors. So enter the backtest…
Backtesting is like your research for your system. You need to determine how that system works as well as if it functions correctly. You can do that by establishing some random rules, throwing your money in the market, apply those rules, hope you stick to those rules without fail and hope that your money grows. That’s a lot of “hopium” to smoke. Or you can do it the cheap way (and by cheap, I mean risk-free)… backtest. The only thing you have to lose is the time it takes to do it, but it needs to be done. I understand that backtesting doesn’t exactly sound sexy. I mean putting on countless pretend trades over and over is very tedious, but I think you’ll find that once you get into a groove and the data starts flowing, you’ll find that it is actually quite addicting, and dare I say, fun!
Does your story sound a little like mine did where you make a little bit and lose a little bit and keep bouncing back and forth only to find yourself where you started? Maybe you’re making returns but not the amount of returns you would like. Maybe you’re even losing money. What’s holding you back from success? Success starts with your why. What is motivating you? Then you must choose by which means are you going to chase your dreams. Since you’re reading this, I assume that is trading. Then comes education. You must learn how to trade by learning the abundance of strategies and how they work. Then comes application which starts with practice. If you go through Christian Sisson’s System Development Course (PRO Members only), he shares crucial steps to developing a system: First is to backtest, then forward test or paper trade, then go live after you prove the system performs correctly.
Keep in mind that the Coaches Shows, Cash Flow Clubs, Mind of a Trader, and all the other content Tackle puts out is not meant for you to take and apply right away in your live account. They are meant to generate ideas. Ideas for you to take onto the practice field first, then take it to the big leagues.
Do people step onto a professional baseball field and automatically start hitting home runs? Absolutely not, it took years of practice for those players to get where they are. So you can’t expect to become a professional trader without practice as well. All too often, new traders, myself included, skip practice and jump right into the big leagues. We take a course, read a blog, hear a concept on an evening show, then think, “That sounds like a great idea! Let’s place a bunch of those trades tomorrow!” It’s too easy to get excited. Keep in mind that the Coaches Shows, Cash Flow Clubs, Mind of a Trader, and all the other content Tackle puts out is not meant for you to take and apply right away in your live account. They are meant to generate ideas. Ideas for you to take onto the practice field first, then take it to the big leagues.
If you haven’t seen my backtest that I posted in the Clubhouse, feel free to check them out in the following links:
The data is quite interesting. And if you haven’t started on the S.T.E.P. System, do yourself and your trading account a favor and go through the modules. It is packed full of wisdom.
Until next time traders.
Justin Driskell
Justin started his trading journey during a 3-day workshop with Tim Justice in April of 2018. He has always been interested in the financial markets and the opportunity it potentially provides. He likes trading stocks and options. Outside the markets, he’s a husband, father of two boys, and full-time automotive technician.
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3 Replies to “Friday Feature: The Scouting Reports Backtest Series Part I: Why I started the backtesting”
I see the account starting value on the 1st backtest(January 2019) marked as $25,000 but I also noticed that Trades 1 – 9 would require greater than $81,000 to purchase as stock. Am I calculating this correct or is the account value actually greater than $25,000? Thanks for any clarification you can give me.
Mark
I’m not sure it matters one way or the other. The idea behind the backtest, from what I understood from the blog and speaking with Justin, was to better understand how his equity curve would look if he committed to directional trading the delta type strategies. The account value could be set higher or lower than $25,000 and you could have waited to execute these trades over time to not run out of capital. I think I know where you’re going with the question, but the purpose of gathering the data wasn’t to see how a $25,000 account would perform at the exact time of those trades, in my understanding. I believe Justin was trying to learn more about delta trading in general.
Thanks Tim! I am very new to trading, only actively trading for a few months, but learning for about 6 months, so I am just trying to be careful in what I assume. When I used the stock scouting report this week, also using his $250 per trade of risk, I noticed that the capital costs to do all the bullish and bearish setups to be over $100,000. I thought I made a mistake so I went back and calculated the capital needed for his backtest, which was about $81,00 but it mentioned the account balance as $25,000. Really, he was talking about risking $25,000, not just using $25,000. This dramatically changed the yield %, from something that seemed unrealistic, about 9% per month, to something more realistic, about 2-4% per month. I LOVED the article and the work he put into this. I just wanted to be sure I was understanding correctly as I decide to allocate my portfolio. Also, kudos to you and the other coaches on producing scouting reports that perform so well! I think that makes all of us very happy!
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