The Day I Discovered the Wheel: Backtesting
September 7, 2017
Last update: August 2021
Hey everyone, I AM BACK!
I just wanted to say that I was really excited to share my story with all of you, but after the incredible feedback I received from everyone, I think I would be able to write a whole book about it! Hehehehe, but don’t worry, I won’t bore you all with too many details.
Like we discussed two weeks ago, the key to my trading was System Development, and this is why I would like to share with you the system that me and my dear Mentor, Tim Justice created together.
Because I have a really hard time dealing with stress, and because I have a severe case of ADHD, we decided to go with something automated. This way, when I place my orders, I don’t have to do anything else after it is placed. My target, my stop loss, everything is set up. I must say, my fellow Tackle Traders, it took me TWO years to get to this conclusion, and I was only able to do so, because of my Mentor. The reason why I’ve been so frustrated with my trades, was because of my lifestyle and my mindset, were not fit for daily trading, or daily hedging. This is where knowing yourself kicks in. Each system is different, which is why you have to find the one that better fits you!
We started by funneling all of the main strategies used out there. After going through one by one, it was clear that Naked Puts, Covered Calls, and Inverted Butterflies were the right choices for me. After we found gold, I had to learn how to mine it. So it was time for *drumroll* BAAAAAAAAACKTESTING! Luckily for all of us Tackle members, our coaches developed an entire backtesting system that you can find, download and use right here: It is called THE TACKLE TRADING JOURNAL
I felt like I had just discovered the wheel, my people. Seriously. For all of you, who just like me, felt insecure about a certain strategy, and how to apply it, I have one thing to tell you: BACKTESTING! There is nothing like it out there. Our coaches did all the hard work of putting the journal together for us, and all we have to do is to find a stock that fits our Strategy’s Criteria, jump onto Thinkorswim, under your Analyze tab > ThinkBack tool, and BAM! It works like magic! You can test your strategy out as many times as you need. This tool inside ToS, allows us to go back in time, get all the data we need, and that’s where the Tackle Trading Journal enters. We take all of that info and place it into the spreadsheet, and it shows us exactly how our trade would have performed if we had placed it. If you would like to know a little more about Backtesting, I Strongly recommend taking a look at these two incredible posts from our great coach Tyler Craig (Backtesting Part I and Part II). That was the key to my performance. Right there. Me, Thinkorswim, and that journal spreadsheet. I backtested the same symbol around 20 times. This way, when you actually put into action what you practiced, you feel secure! Little Brazilian Advice Of The Day: BACKTEST! And one last thing on backtesting: It is not ONLY about executing the strategy properly but also about being comfortable with the results you get out of it. After you see how it works, you become emotionally ready to deal with whatever the market throws at you. You can see all those big wins without feeling like you are about to morph into a hysterical version of My Little Pony, and you will not want to drown yourself in 15 bottles of wine when you have a loss. It is all about knowing your probabilities and understanding that the process is not made of 100% wins. If it were, Wall Street would have NEVER let us even know about trading.
Now, this is especially for the ladies… I am an old soul stuck in a 25’s year old body. I like pen and paper. I am addicted to the dollar section of Target and all of their stationery, so ladies, come out of the darkness and raise your hand if you also cannot see a cute set of pens or a new notebook without going crazy!
I know. I know… I KNOW! So, why not unite the best of two worlds and just plan your trades on paper too? I don’t know if this is just me looking for an excuse to buy even more stationery, or if my ADHD requires seeing the trade explained on paper instead of just into a spreadsheet. All I know is that it works. The moment I have my entire position on paper, all highlighted with beautiful handwriting, I feel so accomplished hahahahaha. So here is a pic of a few of the trades I placed this past month. If you would like to share your stationery trades with us, just use the hashtag #TTStationerytrade with us on Social media for a chance to be highlighted on our platforms!
Thank you all for having me, and stay tuned, because next week we will have our dear Emily taking back the wheel, ready to share more and more with all of us 😀
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Thanks Emily! Not quite there yet, myself. I’m sticking with basics for now. But, good stuff. And It’s not just a gal thing. I have been doing about the same thing with my paper trades. It is just easier to check myself when it is written down, before entering the trade. But, I use a more manly spiral notebook. LOL.
Thank you Emily! You are on the right track! Thanks for the reminder. I need to backtest more…
Awesome! Love backtesting for those two reasons too, getting a feel for the $wins/losses and win percentages as well as designing position sizing for losing months and losing streaks. Can’t wait to see your colorful trade exit notes!
Great Read!