User Guide: The Best Strategy Finder

Best Strategy Finder: A Step-by-Step Guide

The tool every investor wishes they had years ago

This tool doesn't just find the best indicator—it finds the best optimized version of that indicator. It automatically tests hundreds of parameter combinations to discover the most effective historical settings, turning what would take YEARS of manual research into a one-minute process.

Mode 1: Find the Best Strategy (Discovery)

1Define Your Scenario

This section sets the foundation for your test. Every field is crucial for accurate results.

  • Ticker Symbol: Enter the stock, ETF, or mutual fund (yes, you can even market-time mutual funds!). The tool uses this to pull all the necessary historical price data.
  • Date Range: This is the historical period the simulation will run over. A longer timeframe (e.g., 10+ years) is generally more reliable because it includes different market conditions like bull markets, bear markets, and sideways periods.
  • Initial Capital: This is the starting cash for the simulation. It's used to calculate position sizes and overall returns.
  • Commission per Trade: Enter your broker's fee if they charge one. Including this makes your final return calculations more realistic, as trading costs can add up.

2Set Your Filters (Optional but Recommended)

This step allows you to tell the system to ignore strategies that don't meet your personal criteria.

  • Optimize parameters for each indicator: If checked, the tool won't just test the default settings for each indicator (e.g., a 20-day moving average). It will test hundreds of variations (5-day, 10-day, etc.) to find the absolute best-performing version of that indicator. This is the key to automating what would normally take years of research.
  • Enforce Maximum Drawdown: This is a powerful risk management filter. A "drawdown" is the largest single drop from a peak to a trough in your portfolio's value. By setting a maximum here, you're telling the tool: "I don't care how profitable a strategy was if it would have forced me to endure a loss greater than my limit." For context, the S&P 500's max drawdown in the last 25 years was -52%. This filter helps you find strategies that align with your personal risk tolerance.

3Run & Analyze the Results

After clicking Find the Best Strategy, the tool will perform thousands of calculations. Once it's done, navigate to the Strategy Leaderboard tab. This is your primary result.

  • What it is: A table that ranks every single indicator tested, from best to worst, based on its final Compound Annual Growth Rate (CAGR).
  • What to look for: Look at the top performers. Do you see a pattern? Are moving averages consistently outperforming momentum oscillators, for example? This gives you an immediate, data-driven insight into what types of strategies have historically worked for this specific stock.
  • Next Step: Click the "Fine-Tune" button on any strategy that looks interesting. This will take you into the "Simulate a Specific Strategy" mode with all the best parameters pre-filled, allowing you to dive deeper into the analysis.

Mode 2: Simulate a Specific Strategy (Validation)

1Define Your Scenario

Just like in the first mode, start by filling out the Ticker, Date Range, and Initial Capital. These inputs are the foundation of your specific test.

2Configure Your Custom Rules

This is where you tell the tool exactly what idea you want to test.

  • Buy Indicator: Choose the specific indicator you want to generate "buy" signals from the dropdown menu.
  • Parameters: Once you select an indicator, its parameters will appear. For a Simple Moving Average (SMA), this would be the `period`. For RSI, it would be the `period`, `oversold`, and `overbought` levels. Adjust these to match your hypothesis.

The Power of the Separate Sell Rule

By default, the tool sells when the opposite of the buy signal occurs. This is logical, but not always optimal. Different indicators are good at different things—some excel at identifying the start of a trend (a buy signal), while others are better at spotting when a trend is exhausted (a sell signal).

By checking the "Use a Separate Sell Rule" box, you can pair the best of both worlds. A powerful technique is to first find a great buy signal in Mode 1, then come here and manually test different sell indicators. Many subscribers will simply go down the list, testing each one to see if it improves the overall return. This allows you to squeeze out extra profit that the default exit rule might have left on the table.

3Run & Analyze the In-Depth Report

Click Run Backtest. This generates a detailed report. Here's a deeper look at the most advanced tab:

Deep Dive: Understanding Sensitivity Analysis

This is arguably the most important tab for validating a strategy. It answers the critical question: "Is my strategy's success a fluke, or is it robust?" It does this by automatically re-running the backtest with slightly different parameters to see if the results fall apart.

How to Decipher the Chart:

The chart shows how your strategy's return (CAGR) changes when a single parameter is adjusted. The highlighted bar is the parameter you tested.

  • A good chart shows stability. The highlighted bar (your tested parameter) should not be a lone peak. For the strategy to be considered robust, at least the bar to the immediate left and right should be in a similar range of performance. This indicates that the strategy's success isn't dependent on one "magic" number and is more likely to be reliable in live market conditions.
  • A bad chart has a sharp peak—one tall bar surrounded by much shorter ones. This indicates the strategy is sensitive or "over-fit." It means the great performance was likely a fluke of historical data that only worked with that one specific setting. These strategies often fail in live trading.

How to Act on the Alerts:

  • OPPORTUNITY ALERT: This appears when the tool finds that a slightly different parameter than the one you tested produced materially better results. It's a direct, data-driven suggestion for improving your strategy.
  • RED ALERT: This appears when the results are highly volatile (a sharp peak on the chart). It's a warning that your strategy might be unreliable and fragile, even if the original result looked good.

How to Go Back and Change Parameters:

If you see an Opportunity Alert or notice a more stable range on the chart, follow these steps:

  1. Note the better parameter value suggested by the alert or the chart.
  2. Click the "Back" button at the bottom of the page to return to Step 3.
  3. Find the parameter you want to change (e.g., `period` for an SMA).
  4. Enter the new, improved value you noted from the analysis.
  5. Click "Next" and then "Run Backtest" again to see the full report for your newly refined, more robust strategy.

Indicator Definitions

Trend Indicators

What they do: These indicators smooth out price data to identify the direction and strength of a trend. Examples include Simple Moving Average (SMA), Exponential Moving Average (EMA), MACD, and ADX.

Why they're important: They help you trade with the prevailing trend, which is a core principle of many successful strategies. They filter out day-to-day market "noise."

Best for: Stocks that exhibit long, clear trends, such as established large-cap growth stocks or broad market ETFs.

Momentum Oscillators

What they do: These indicators measure the speed and change of price movements, often to identify "overbought" or "oversold" conditions. Examples include Relative Strength Index (RSI), Stochastic Oscillator, and Commodity Channel Index (CCI).

Why they're important: They can signal when a trend might be losing steam or reversing, providing potential entry and exit points.

Best for: Stocks that tend to trade in a range, or for identifying potential turning points in volatile stocks like those in the technology or biotech sectors.

Volatility Indicators

What they do: These indicators measure the degree of price variation. Examples include Bollinger Bands, which create a dynamic channel around a moving average, and Keltner Channels.

Why they're important: They provide context for price movements. A price touching the upper band isn't necessarily a sell signal on its own, but it shows that the stock is reaching an extreme relative to its recent history.

Best for: Nearly any type of stock, as they help you understand the current volatility environment and adapt your expectations.

Volume Indicators

What they do: These indicators use trading volume to gauge the conviction behind a price move. Examples include the Money Flow Index (MFI) and Chaikin Money Flow (CMF).

Why they're important: A price move accompanied by high volume is generally considered more significant than one with low volume. These indicators help confirm the strength of a trend.

Best for: Any stock, but especially useful for confirming breakouts in growth stocks or identifying accumulation in value stocks.