Ep. 1105: A Double Punch with Michael Covel on Trend Following Radio
Michael Covel's Trend Following
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How to Backtest a Trading Strategy
I think it's very tempting when you get holders and backtesting software and you have some good ideas to start playing with it and see what happens. The first is a very easy thing to understand, which is that essentially you're cheating. And the second problem is that it's just kind of pure statistics really. If you test a lot of different trading strategies, even if on average they're all bad, some of them will look good for a given time period. Even though in actuality they're all, none of them actually profitable, it's just luck that 16 of them over your backtest period happen to work pretty well.
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