Backtesting assesses the viability of a trading strategy or pricing model by discovering how it would play out using historical data. We analysed our strategy using the last 5 years stock price movements of the stock components that make up the Trillium Capital Index Fund. We look at the daily open and close price of each individual stock. Using this data we can see when our buy and sell parameters are triggered, which in turn gives us what the returns would have been had we tradted the strategy.
The chart below compares the 5 year back test backtest of the Trillium Capital Index Fund strategy to the performance of the S&P 500 and the NASDAQ.
Trillium Capital Index Fund
The fund is a basket of 50+ of the most actively traded US company stocks listed on the Nasdaq stock exchange. Several of them are also listed on the Dow Jones 30 and the S&P 500. The companies are from various industries including technology, health care, industrials and many others. Although they are US companies, 27 countries are tied to companies represented in the index
It is constructed on a modified capitalisation methodology. This modified method uses individual weights of the companies according to their market capitalisation. Weighting allows constraints to limit the influence of the largest companies and balance the index with all constituents. The stock list is reviewed each quarter and weightings adjusted if the distribution requirements are not met.
All stocks within the index need to have an average daily trading volume of 200,000 and publicly report earnings quarterly as well as annually. They also must be a component of the Nasdaq index for at least 5 years to be included this eliminates the smaller companies that come in and out of the Nasdaq from time to time. These criteria make for a more consistent and stable return
Our primary trading strategy is Swing Trading. This involves buying a stock to capture gains over a short to medium term time period which can range from a few days to several weeks. Swing traders take advantage of the price momentum of a stock. .
We have developed a unique set of technical analysis parameters that we apply to our stock list to find trading opportunities. Our parameters include looking at the daily charts and have defined buy, sell, and trigger signals. Many of the stocks we hold pay dividends which we see as an added bonus to our returns.
We have developed a unique trading algorithm. It is a Rule based algorithm as opposed to a Model based one. We set the trading parameters and the algorithm uses these to select and execute the trades on a daily basis. We selected these specific parameters based on our shared trading experience. Our strategy has been back tested extensively and this has confirmed that it is a profitable one.
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