Trading Sub-universe

[ScottMcNab]

I have been returning to the idea of creating a sub-universe of stocks (eg within SP500) or maybe ranking all the stocks in the SP500 based on their past results with a specific trading system. I have noticed that some stocks frequently mean revert intra-day while some almost never do. When I run the backtest on individual stocks some have a very low win rate (eg 30%) while others are into the 60%. I am thinking that the ranking system or sub-universe could be re-optimized (not sure if that is best word) every 3-6 months.

For a breakout or momentum system, using the results of the system’s backtest to create a sub-set of stocks or ranking system would instead select stocks that did not show a tendency to mean revert in the short term

Curve fitting ?

[LeeDanello]

Isn’t it all? Your fitting a trading system to a universe of stocks to profit. Maybe I should have written exploiting patterns. If it improves your results why not. Sounds like a good idea.

[ScottMcNab]

Or maybe just use it to drop the worst 100…reducing SPX to 400 …should help potentially with selection bias too
All based on the premise that some stocks don’t mean revert as “well” as others…which may not be true

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