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Chuck,
With regards to #3 ... imho the order should be for 10% of the then
total assets were not total available cash. I can't vouch for what
AB does or doesn't do in situations where securities are being
replaced like this, however if it typically attempted to trade 10% of
available cash then wouldn't it have established increasing smaller
positions in the equities that were originally bought when the market
signal went to a buy ?
i.e.
1st entry = 10% of 100,000 = 10,000
2nd entry = 10% of 90,000 = 9,000
3rd entry = 10% of 80,000 = 8,000
etc.
This I can say that I am NOT seeing.
Fred
--- In amibroker@xxxxxxxxxxxxxxx, <chuck_rademacher@x> wrote:
> I'm certainly not saying that there is a bug in the backtester. I
just wondered what other users think of what I see happening in my
research. In fact, after typing everything that follows, I've come
to the conclusion that the problem is in my own AFL. However, I
believe that my coding is exactly or at least similar to what
everyone else is doing.
>
> I'll attempt to describe the situation:
>
> 1. I'm using the "normal" portfolio backtesting mode with market
timing. My systems will typically lay on some number of positions
when the "market" turns up and quit all of those positions when the
market turns down. The systems do have 50% loss stops (that are
seldom hit) and profit stops that are frequently hit.
>
> 2. Assume we are flat today.
>
> 3. We download our data, run our backtest and place our orders for
tomorrow's open.
>
> 4. Assume that we have $100,000 in our account and we have used
PositionScore to rank our 50 or so buy signals and that we are going
to have a maximum of ten positions.
>
> 5. We will have ten buy orders, each for about $10,000.
>
> 6. Let's say that after a few days, one of our positions hits our
profit objective and we exit with a $3,000 profit.
>
> 7. This leaves us with $13,000 to invest tomorrow.
>
> 8. Assuming that the market is still in an up-trend, AB (our AFL)
is going to find a new stock for us to buy. I believe that it is
going to divide our available funds ($13,000) by ten and that it will
invest only $1,300 in the stock that is replacing the stock we quit
at our profit stop. Why wouldn't it? After all, it's my own AFL
that says something like:
>
> PositionSize = -100/posqty;
> or
> PositionSize = -10;
>
> The questions I have are:
>
> 1. Do you agree that this is what is happening?
>
> 2. Does this explain why we are not able to achieve the exposure
percentages that we expect?
>
> 3. Would you like the buy order be for $1,300, $10,000 or $13,000?
>
> 4. Have you solved this problem yourself with some fancy AFL? I'm
thinking that I may, for instance, be able to calculate position size
at the beginning of a market cycle and use it throughout that
cycle. In other words, I would determine that for the next cycle,
all positions will be $10,000. Profits would just be set aside for
the next cycle.
>
> I look forward to hearing from those of you who are interested in
this subject.
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