The following information is for educational and entertainment purposes only. Rio Verde Trading and the author make no claim that anyone can or will achieve similar results in their trading.
In developing my proprietary trading system I did extensive back testing, sometimes called paper trading. In addition, going forward, I track all trades that develop in the exchange traded funds that I use, even if I do not take every trade that develops.
Today I would like to show a brief summary of the QQQ performance derived from back testing of my proprietary trading system. QQQ is the Exchange Traded Fund which tracks the NASDAQ 100 stock index.
I have back tested QQQ from 2 January 1997 to 29 January 2015.
Total trades in back test 249. Average win per trade 0.83 per share.
There were 211 winning trades which equals 84.74%. 38 losing trades equaling 15.26%.
The largest winning trade closed on 13 October 2000, with a profit of 13.26 per share. The largest losing trade closed on 17 May 2012, with a loss of 12.24 per share.
56.6% of all trades lasted one day. 24.5% of trades lasted two days. 11.2% of all trades lasted three days.
Another interesting statistic is that in the last major market correction of 2007-2008, my trading system out performed a buy and hold strategy of the QQQ.
In 2007 QQQ showed a profit of 1.06, while the trading system had a gain of 7.91.
In 2008 QQQ had a loss for the year of -16.07, while the trading system had a profit of 22.68.
It is a characteristic of this trading system that it performs better in bear markets than bull markets. It makes a nice contrarian trading system.
Remember all the above information was derived from back testing, not from actual trading. Real money trades will always perform less because of commissions, slippage, bad fills and inevitable mistakes. My actual trading performance, for all the trades I have made since utilizing this system, is that 74% of all trades closed with a profit.