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
