Error in backtest results (Inflated profits)
-
I have done backtest for various strategies and upon checking the returns of individual stocks found that few stocks show very high return due to abnormally high quantity of purchase of that particular stock.(I had kept total investment of Rs 500000/- with 5 stocks. So ideally each stock should be bought for equal amount, but few stocks are shown bought for 3-4 times the available amount and their exit is showing high profits, this lead to overall high CAGR whereas actual CAGR might be quite less) . Definedge may look into it and explain the reason for this. I would be happy to be wrong in my analysis as it would keep my faith intact in backtest and strategies. I'm attaching screen shots. The stock Adaniensol at Sl No 05 was bought for Rs 151553/- whereas available cash as per strategy is not more than one lakh. Later at Sl no 22 AU Bank was sold for amount Rs 1,09,710/-. This was the amount available for next stock purchase however, the next stock purchased is Bajaj finance for Rs 3,03,320. It has given high profit and thus overall profit and CAGR increased substantially. I found such errors in almost all backtests.
-
-
I have shared the screen shot of system builder. It's AFT or Tutle (strong Bullish pattern). Box size is 0.25 percent and timeline is 01 Jan 21 to 14 Mar 26. Exit condition is below D Smart(6 period). Please analyse it and let me know the reason.
