System Development Questions

[jhellisjr@xxxx]

Hi all:

I've been been monitoring the list for the last few months, 
establishing my databases, and working on the AMI learning curve. 
I've been trading US equities for about two years and AMI is the 
first tool that I've used for backtesting. I have a decent grasp of 
programming including AFL and Jscript and a reasonably good grasp of 
technical analysis. But I'm finding developing a good system to be a 
harder than expected task.

In general, I've found that the backtest results can vary greatly 
depending on how these formulas are used. In fact of all the systems 
that have been posted in the list over the last 6 mos. I've yet to 
backtest ANY that give results close to that of BUY&HOLD when tested 
on the stocks comprising the DJIA/NASDAQ100/SP500 US markets over the 
last 10-20 years w/o even including the effect of stops and drawdowns.

I'd like to hear from the backtesting and system development 
experts...

Should a system be developed and tested over an entire market or 
tailored to fit an individual stock?

Should a system be developed to fit both bull and bear markets or 
just the recent trading time period?

Should a system be able to beat the buy & hold results as AMI 
calculates them or is this just a relative best-can-do benchmark?

Should a system be developed and tested with or without a STOP?

Should I just give up and buy a good indexed mutual fund? I hope 
not! :-)

TJ, you mentioned earlier summarizing the system backtest results in 
the library...

I'd like to suggest that the user community establish a standard that 
these systems are backtested to for the purpose of including these 
results in the AFL library. Here's some thoughts...

Standard US and/or non-US market.
->30DowStocks
->Other Non-US
Standard time frame to include all market types.
->1980-to-Present
->Other
Standard Entry/Exit
-Next Day Open
-Other
Standard results such as...
->Return
->Return vs. Buy/Hold
->Max Drawdown
->Win Rate
->Profit Factor
->Other

Finally, it was suggested earlier on the list that the Drawdown from 
the Backtester Report is the entryprice-to-trough rather than the 
peak-to-trough. Is this correct?

Thanks and best regards,
Jim