Analyzing Industry

Industry Analysis

Every time I sit down to speak with someone about the markets they ask me one of two questions.

  1. What stock should I invest in?
    1. I’m not an investment advisor, so legally I can’t tell you.
  2. What industry is going to explode
    1. Again, I’m not an investment advisor, but the cool thing is that we can actually take a look at how every single industry has performed over the past twenty years within Equities Lab.  So I can give a half answer?

Within our software you can run multiple backtests at once, this is known as B1, and can be found under the trading rules tab on the top right.

 

Click on the green plus sign and search “industry”. Once you find the industries, go ahead and add them to the backtest.  Run that, and you’ll see how every industry performed over the past twenty years.

 

It’s actually surprising that gas and oil did so much better when compared to the rest of the industries. However, this doesn’t really give us much information on what’s happening more recently in the world, or give us any indication of where those industries might be going – especially since just about every industry has ended up positive over the past twenty years.

 

Let’s shrink the time frame to just the past four years so we can have a better idea of where industries are moving in the short term.

 

Now we are getting somewhere.  We are getting industries that are negative over the past four years – specifically Coal, which has lost 85% in the past four years.

 

On the flip side we have airlines which have completely separated themselves from the pack thanks to low oil prices and airlines buying up futures contracts to secure those low prices for X amount of years.

 

Here’s another look at the industries individually to see how they each perform year after year.

 

All in all, Many of the industries have grown in the past four years; though, this year is seems that there are far more losing industries than any of the previous years’ putting building materials, travel leisure, personal services, non-alcoholic beverages, packaged goods, and insurance in the lead.

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4 Comments

  1. tyler Farhan says:

    Do I have to create a stock screener first to get into the trading rules tab?
    I am not able to pull the data like the one on your first screenshot

    • tyler Tyler McCain says:

      You do need to create a stock screener in order to get to the trading rules tab. These rules are what guide the strategy throughout the backtest, allowing you to create a strategy that best fits your personal investment philosophy.

      From that tab, if you click on “B1” you should be able add as many extra fields of data as you’d like.

  2. tyler WILLIAM says:

    I am a very novice trader,i.e. starter forex,what could I do to learn and take advantage of a program like yours?

    • tyler henry says:

      I’d start with very basic screens (such as P/E < 10, or close > close as of 251) to see how you can filter stocks in a way that tilts the odds in your favor. In general, investing quantitatively means throwing darts at a dartboard — but you get to control what makes it on the dartboard. The stock market’s randomness doesn’t prevent you from making money because there are ways (such as value or momentum, or fundamental strength) to filter out stocks that are less likely to do well. That leaves you picking randomly from a stable of winners, which is a recipe for win.

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