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Steve,
You seem to have grasped the portfolio backtest
quite well.... "Stock Selection" might have been an unfortunate phrase that I
used ...
What it provides above all is that it provides some
approximation to the real world.
Your conclusion that "Should I infer that those
stocks that were actually traded are the best stocks to trade with that system?"
is quite correct. The issues trades were indeed the best at the "time and place"
when avaiable funds and opportunity met.
Portfolio backtester provides some additional
useful functions / controls.
- PositionScore: Allows you to prioritize
selection. Example: Say you are buying stocks with a rising stochastic. You
would of course prefer stock that have the lowest value of stochastic. You can
specify a range of course, but PositionScore can pick the issue with the lowest
stochastic value within the permissable range.
- It also provides you valid data of drawdowns and
other statistics that would not be as accurate or even possible with individual
backtest.
- Further, advanced backtest has some additional
features such as scale-in, scale-out etc...
While individual backtest may provide some info by
testing every issue, I don't think that you will miss any significant insight if
you switch to portfolio testing.
Stock Selection for actual trading would still be
done from an exploration, so the fundamental process of trading does not change,
but the information provided by portfolio level is better and simulation is more
realistic.
----- Original Message -----
Sent: Friday, April 28, 2006 3:29
PM
Subject: Re: [amibroker] Portfolio
Backtester
Hi Ara,
Thank you for the reply! Well, I have
to admit that you make it sound pretty simple and
straigntforward, and I think maybe you zeroed in on my confusion
when you mentioned "stock selection system", but to be honest I think I
am still missing something very basic. If you don't mind a follow-up
question, I will try to explain:
Using the individual backtester, I select my
watchlist and then run my system over the list. When the test is
finished, results show each stock and how well it performed under
that system. I review the results to see how well the different stocks
performed and to determine what stocks, if any, that I might consider
trading with that system - stock selection is not usually something that I do
prior to testing, except to establish a "tradable universe" based on various
price/volume calculations. Also, I do use the Positionsize
variable with the individual backtester to see how reinvesting
different amounts would affect performance.
Now switching to the portfolio
backtester...
OK, I understand that in real life we will
have an account with X amount of dollars, and that it will probably be split
up between several positions ( our portfolio ), and that we will try to remain
fully invested if possible, assuming we can find enough good looking
opportunities to invest in. So I run the portfolio backtester on a list
of, say 1000 stocks, and the results list shows all trades that were
taken, and it shows that, at some point or another, a position was taken
in maybe about 10% of the stocks in the watchlist, which I gather were
the ones that had an entry signal and the best score shortly
after some cash became available. The other tickers tested don't show up
at all in the results list, so apparently no position was ever taken in these
stocks. When I look at these results, I just don't know how to begin to
interpret them.
So I guess my real question is "What can I
learn from looking at the results of a portfolio backtest?"
I get the feeling that the
correct approach to using the portfolio backtester should
be totally different than the approach for using the individual
backtester, but I don't know what that approach should be. Should I
test with a smaller list of stocks - a predefined portfolio? Should
I infer that those stocks that were actually traded are the best stocks to
trade with that system? - that sounds like a lot to infer to me, but
maybe I am missing something. Could you
possibly explain briefly how you might approach a
portfolio backtest (i.e. - what stocks might you test together and why?)
and then how you might interpret the resulting report? Any further
enlightenment you can provide would be greatly
appreciated!! 8 - ) Thanks again!
Steve
----- Original Message -----
Sent: Thursday, April 27, 2006 8:52
PM
Subject: Re: [amibroker] Portfolio
Backtester
Steve
The idea behind Portfolio backtest is to
simulate trading closer to reality.
Original Backtester would allocate ALL
available funds to each trade. Not a real situation since no one has
infinite $$$.
Portfolio backtest will work with your account
size and buy only as many stocks as you can afford. You can specify max
number of stocks you want, and it will allocate funds evenly ... etc. so it
works with your account parameters, while still testing your stock selection
system. It will buy additional stocks only fter you sell some and free up
some money.
----- Original Message -----
Sent: Thursday, April 27, 2006 1:26
PM
Subject: [amibroker] Portfolio
Backtester
Hi All,
I started looking into the portfolio
backtester today for the first time, and I am a bit embarresed to admit it
but I have absolutely no idea what to do with it. Functionality is
explained OK but there is very little to explain the theory behind
portfolio testing or trading. I did a little hunting on the internet but
am not exactly sure what I should be searching for. Is this for
people that do basket-trading or something similar? I would greatly
appreciate it if someone could explain how and why I would want to
use this, or if possible point me to some helpful web pages. As I have
said, I know nothing about it, so even the very basics would be great. Any
help appreciated - Thanks very much!
Steve
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