{"id":2013,"date":"2010-04-28T01:30:13","date_gmt":"2010-04-28T05:30:13","guid":{"rendered":"http:\/\/club.ino.com:80\/trading\/?p=2013"},"modified":"2010-04-27T15:14:25","modified_gmt":"2010-04-27T19:14:25","slug":"baseline-for-active-investing","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2010\/04\/baseline-for-active-investing\/","title":{"rendered":"Baseline for Active Investing"},"content":{"rendered":"

\"\"Today's author is Jackie Ann Patterson, the editor of BackTesting Report<\/a>. Previously Jackie Ann showed us how to pick up on a potential trend change as well as how to recognize a mature trend using the MACD indicator. Today she has returned to the Trader's Blog to share a method for testing your trading strategy.<\/p>\n

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\nOne of the ways that traders use to determine the success of a potential strategy is to use a baseline. A baseline is a benchmark or a standard for comparison. For example, some investors will use the gain\/loss of the S&P 500 as a baseline of market performance. That may be useful for investing long-term in large-caps, but less applicable to active investing and shorter-term trading. This article shows you a different method of forming baselines and the win rate results for two types of stock market participants.<\/p>\n

Traders tend to gravitate to particular strategies, largely based on how frequently the trader wants to trade.\u00a0 Another point of view is that a strategy is selected, in part, because of how long it tends to hold a position.\u00a0 Therefore it makes sense to evaluate a strategy by comparing it to a baseline with a similar holding time.<\/p>\n

The baselines we use for comparison at BackTesting Report are exactly that.\u00a0 They are defined by the length of time they hold a stock:<\/p>\n