Sent: Friday, April 28, 2006 11:33
PM
Subject: Re: [amibroker] Portfolio
Backtester
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
