SI155: How to Create the Perfect Backtest ft. Richard Brennan

This week, Richard Brennan joins us to discuss whether there are any similarities between Trend Following and other investment approaches, the benefits of ‘forward-testing’ a system, the art of ‘hunting outliers’, what the optimum level of leverage could be, how much total portfolio ‘risk-to-stop’ to aim for, some thoughts on margin requirements, and which other strategy complements Trend Following the best. We also took a deep dive into backtesting, touching on topics such as: how much we can safely derive from a backtest, why a backtest with a smooth equity curve should raise alarm bells, a good checklist to use when creating a backtest, and whether some level of curve-fitting may actually be required for a good backtest.-----EXCEPTIONAL RESOURCE: Find Out How to Build a Safer & Better Performing Portfolio using this FREE NEW Portfolio Builder ToolIn this episode, we discuss:Which strategies would complement portfolio with 80% already allocated to Trend FollowingWhy 'forward-testing' a system can be quite important before going liveThe art of finding and latching onto outlier performersLeverage, margin, & total portfolio risk-to-stopWhat information to look for in a backtestHow to avoid 'curve-fitting' (and could some curve-fitting be beneficial?)-----Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.Learn more about the Trend Barometer here.Send your questions to [email protected] please share this episode with a like-minded friend and leave an honest Rating & Review on iTunes or Spotify so more people can discover the podcast.Follow Rich on Twitter.Episode TimeStamps:00:00 – Intro03:25 – A massive thank you to listeners of the show for leaving your 5-star reviews on iTunes03:47 – Macro recap from Niels05:57 – Weekly review of performance10:59 – Trend Followers as hunters of outliers13:34...