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
