Friday Feature: The Scouting Reports Backtest Series Part I: Why I started the backtesting
July 26, 2019
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.
Tackle Trading Resources on Backtesting
Why backtesting? What are the benefits? How to run backtesting? How to collect and analyze data? What types of trading systems can I backtest? What are the tools available to run backtests?
These and many other questions have been already answered in our extensive pool of articles on backtesting.
Tales of a Technician: Perfecting Your Process Part One
Traders should be process-oriented, not results-oriented.
Tales of a Technician: Perfecting Your Process Part Deux
Today we continue our carefully crafted tale on how to perfect your process.
Cash Flow Club June 22nd, 2017: Backtesting Trading Systems Part 1
If you missed last night’s show where Coach Tyler Craig talked about Backtesting Trading Systems or you would like to watch it again, check it out here.
Cash Flow Club June 29th, 2017: Backtesting Trading Systems Part 2
If you missed last night’s show where Coach Tyler Craig talked about Backtesting Trading Systems or you would like to watch it again, check it out here.
The Day I Discovered the Wheel: Backtesting
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!
Options Theory: Baby Got Backtesting Part 1 – Why Backtesting?
I have a confession to make – I never used to backtest, ever. Blame it on my ignorance.
Options Theory: Baby Got Backtesting Part 2 – How to Backtest?
In the first part of our backtesting series, we explored the what and why of the process. Today we get down to brass tacks and talk about how to go about backtesting.
Options Theory: Baby Got Backtesting Part 3 – Backtesting Execution
Welcome to the third and final installment of our series on backtesting. You selected a strategy and systematized it, and now you want to see how it would have performed.
Tackle Today: Back › Forward › Live
Backtest › Forward test › Go Live. The antidote for the risk of ruin.
Friday Feature: The Scouting Reports Backtest Series Part I: Why I started the backtesting
Have you ever wondered how well the Scouting Reports picks actually perform? This is what I am answering with this 3-part series on the Scouting Reports backtesting.
Friday Feature: The Scouting Reports Backtest Series Part II: What I learned from backtesting
Have you ever wondered how well the Scouting Reports picks actually perform? This is what I am answering with this 3-part series on the Scouting Reports backtesting.
Friday Feature: The Scouting Reports Backtest Series Part III: How backtesting shaped my trading
Have you ever wondered how well the Scouting Reports picks actually perform? This is what I am answering with this 3-part series on the Scouting Reports backtesting.
Friday Feature: The Scouting Reports Backtest Series Epilogue
“[…] It all comes down to mindset. Chipper talked about how it takes a strong will to be able to fail 70% of the time and press on, practicing, playing, and striving to be better without the failures weighing down on you.” Trust your system, traders.
Tales of a Technician: Backtesting 50-day Moving Average Signals
Come learn about why the 50-day moving average generates powerful trend reversal signals.
Friday Feature: How the S.T.E.P. System helped me build my rules
I used the information that was in the S.T.E.P. System to refine my trading plan to fit my personality. Continue reading.
Tackle Trading Resources on Journaling
Trading Journals
Good traders keep excellent records. Quality trading journals are essential to your progress and growth as a trader and keeping good records will help you learn more from both your income and expense trades.
Learn more about HOW the Tackle Trading Journals can help you become a professional trader.
Trade Journaling for Beginners [Free Articles]
Continue learning about this powerful trading tool: the Trade Journals. Tackle Trading has all the resources you need to MASTER them like a PRO. From the Trade Journals themselves to free articles and tutorial videos on how to make the most out of them, we got you covered!
How to use the Theta Research Tool to find the best stocks for Cash Flow
In this video tutorial, Coach Matt goes through the latest edition of the Options Research Spreadsheet explaining how to use it to find the best stocks to cash flow.
How to use the Theta Research Journal to find cashflow candidates
In this video tutorial, Coach Tim teaches how to find the best candidates to trade cash flow options strategies using Tackle Trading’s Theta Research Journal.
Tackle 25 List: The Best Stocks for Covered Calls (2016 Edition)
The Tackle 25 2016 Edition is up and better than ever. This list contains the best stocks to cash flow and compound your gains.
Tales of a Technician: Journals, Systems and Discretion
Once upon a time I didn’t use a trade journal. Then I got smart.
Trade Journal Series: How to use the Theta Research to find Covered Call candidates
In this video tutorial, Coach Tim Justice teaches how to find the best candidates to trade the Covered Call options strategy using the Theta Research tool.
Trade Journal Series: How to use the Trade Journal
In this video tutorial, Coach Tim Justice will teach you how to use a powerful trading tool: the Trade Journal.
Tackle 25 List: The Best Stocks for Covered Calls (2017 Edition)
The Tackle 25 2017 Edition is up and better than ever. This list contains the best stocks to cash flow and compound your gains.
The Day I Discovered the Wheel: Backtesting
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!
Tackle Today: Organization is Key Part 1 – Trading Business
You might’ve asked yourself at a certain point: “How should I start to make this trading activity a business?”
Tackle Today: Organization is Key Part 3 – Trading Journal
A Trading Journal is not something superfluous. It is crucial. Continue reading.
Notes from a Newbie: The Trade Journal is your friend
The trade journal is your friend, use it!
Options Theory: Size Matters
Do you have consistent position sizing and are you tracking your trade stats? If not, then here’s your invitation to start.
Friday Feature: Habits of a Wealthy Trader – Part 2: Journal Your Trades
You need to treat journaling as a fundamental step in your data and behavior analysis to help you succeed.
Tackle Today: Organization is Key Part 2 – Business routine
Like any other business out there, your trading business must have a routine. Continue reading.
Women in Trading – Journaling
Journaling: I know based on my own experience that it is the most dreaded topic when it comes to trading, yet it is an important part of a trader’s journey.
Financial freedom is a journey
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
Legal Disclaimer
Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.
All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.
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!