How the Tactfolio Score works
The Tactfolio Score orders the public strategy index. It is our estimate of the Sharpe ratio a strategy will earn from here on. A score of 0.50 means we expect about half a unit of return for each unit of volatility.
Why not just sort by backtest results?#
A backtest is written with the past in view. The author picked the rules, the assets, and the lookbacks while looking at the same history the backtest replays, so backtests flatter almost every strategy. Studies of published investment strategies find that their results often shrink by around half once they are out of sample.
What a backtest cannot fake is its live record: the results of fixed rules on prices that did not exist when the author published them. Every public strategy on Tactfolio has one, counted from the first market close after publication. The score leans on it more the longer it runs.
How it is calculated#
After each market close, Tactfolio updates every public strategy's score from two numbers:
- The backtest Sharpe of the current version over up to 10 years, the same figure the index shows. It counts at half. A backtest shorter than 10 years counts proportionally less: 5 years of history counts half as much as 10.
- The live Sharpe of the whole live record, across every version, from its first close after publication. Early numbers are capped between −3 and 3, since a few weeks can produce almost any ratio.
The two are blended by the length of the live record:
| Live record | Live record's share of the score |
|---|---|
| None yet | 0% |
| 6 months | 14% |
| 1.5 years | 33% |
| 3 years | 50% |
| 6 years | 67% |
So a strategy published today with a 10-year backtest Sharpe of 1.0 starts with a score of 0.50. If its first three years live earn a Sharpe of 0.4, its score becomes 0.45.
Each strategy page shows its score and the numbers it came from.
What the score does not measure#
- Drawdowns. Two strategies with the same Sharpe ratio can have very different worst losses. Check the drawdown column and chart before you follow anything.
- Costs and taxes you face. Backtests and live records include the trading costs set in each strategy, not your own.
- The future. A high score says a strategy has done well by these rules so far. It is not a forecast you can rely on, and it is not investment advice.
The rules may change as the index and its live records grow. When they do, this page will say what changed.