Links

Net Profit

Definition

Net Profit refers to the percentage of profit generated over a given period of time. In our statistics section, we will observe the net profit for securities generated over varying time periods and how these numbers allow us to make inferences about the algorithm's performance. The general formula for net profit is as follows:
​
NetProfitPercent=(EndingBalanceStartingBalance−1)∗100NetProfitPercent=(\frac{EndingBalance}{StartingBalance}-1)*100
​

Backtests

To research the ScaleTrade algorithm's performance, we performed a series of backtests over a variety of securities in our active pool. In this section, we will display the results of each security, what their average win was, and what our profit would be if we traded the algorithm from each of the given timeframes.

6-Year Backtest

Listed below is the data for all securities over a 6-year backtest (01-31-2017 to 01-31-2023):
Security
Net Profit
AMZN
898.46%
AAPL
698.28%
NVDA
705.85%
TGT
7.85%

2-Year Backtest

Listed below is the data for all securities over a 2-year backtest (01-31-2017 to 01-31-2023):
Security
Net Profit
NVDA
349.7
AMZN
253.19
TGT
80.18
AAPL
60.8

1 Year Backtest

Listed below is the data for all securities over a 1-year backtest (01-31-2017 to 01-31-2023):
Security
Net Profit
NVDA
128.36
TGT
106.3
AMZN
100.96
AAPL
66.72

Research

From the backtests listed above, we can derive a lot of data. Below we will discuss which securities performed the best on which timeframes and market conditions, as well as create an estimated account value if you traded all securities equally over each timeframe.

Timeframe Analysis

In this section, we will observe security performance over specific timeframes and market conditions. To do this, we will be observing the net profit of each security between these different time frames (2016-2020, 2020-2021, and 2021-2022). Below is a bar chart of each security's average net profit over the given years.
From this, we can determine which years were the most successful for trading. By taking the average net profit of the securities over the different timeframes, we find the following results for average net profit per year:
Timeframe
Net Profit
2016-2020
97.91%
2020-2021
107.88%
2021-2022
78.09%
Based on general market conditions and observations of these securities equity curves, the algorithm tends to perform better in more liquid market conditions regardless of the market regime.

Account Performance

In this section, we estimate the account's performance over the given backtest years. Since we weigh each security equally, we add all net profit percentages together and divide by
n=SecurityCountn=SecurityCount
to determine the exact net profit.​ By applying the profits found in the average net profit table, we can compound them on a simulated account of $100,000 to get the following chart: