Why famous setups can lose money
Our backtest replayed eleven well-known setups on 2,391 NSE stocks from 05 Nov 2024 to 05 Nov 2026. The best-rated picks (1,460 trades) won 40% and averaged -0.10R per trade after costs. Almost every setup, taken alone, was slightly negative.
That surprises people, because these setups come from some of the most successful traders ever. Here is why it happens.
The pattern is not the whole method
O'Neil also demanded strong earnings growth and a leading industry. Minervini combines the trend template, the VCP, earnings and strict market timing. Qullamaggie cuts losers within a day and holds winners for weeks. A chart pattern copied without the rest of the method is only a fraction of it.
The exit matters as much as the entry
Trend traders make their money from a few very large winners. A fixed target of 2.5 ATR and a 10-day limit cut those winners short. We tested other exits too (on the backtest page): none turned the results clearly positive on this period, which suggests the entries themselves had little edge.
Many signals, little edge
The more often a setup appears, the less special it tends to be. The pullback and trend-template setups appeared tens of thousands of times. A signal that fires on hundreds of stocks a day cannot all be great trades.
The period matters
Two years is one market environment. Breakout methods do best in strong, broad bull markets and worst in choppy ones. A different two years could look different, which is why the test reruns every month.
What to take from it
- Be wary of anyone selling a setup without showing tested results.
- Test before you trust. Paper-trade before you use real money.
- For most people, a low-cost index fund held for years beats active trading after costs and taxes.