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This will not cause a problem for many, but it does for me. When I backtest,
I want to be as realistic as possible, and also to include both commission
and inflation in the calculation in a reasonable way. This is destroyed for
me by the number of contracts being handled is based on a old wordint with
maximum resolution of 65000 contracts.
My solution has been to look att the market of Sweden (where I live), the
commission rules, and the contract sizes. As an end result, I do my
backtesting based on always buying for a fixed amount (30000 SEK, or around
3000 dollars), and a commission on that. This means that when backtesting on
previous years, number of contracts goes up, and the value of each trade
will become independent of if it is a recent or a distant trade. Thus all
signals are valued just as important independent of when they occurred in
time.
This is easily done in Tradestation , just to enter a trade based commission
and a fixed amount in the contract setup for the strategy. Now, this works
except for symbols that has been around quite a while and have had a good
price development. For such symbols, the current value will be around
300-400 SEK but the very old value will be around 0.3xxxx SEK (splits,
emissions, ...).
I just learned (never got an error message) that tradestation can not handle
more than 65000 shares in a contract (at least not in the automatic share
calculation). When trying to buy 30000/0.333 shares (90090 shares) it
decides to buy 65000 shares. Thus eliminating my ambition to have the same
value over all years.
This also combines with the decimal discussion we had in codelist a couple
of days ago. Internally, Tradestation cuts decimals in calculations (I think
I can figure out how they implemented that, most likely all internal
calculations are performed in ticks. Thus a price back in year 1984 might be
1.41414. Converted to ticks using the default it becomes 1.414 and number of
contracts decided on deviates from the theoretical. Not by too much, but the
difference is there. The lower the number, the bigger the chance is for a
difference from the theoretical, until suddenly the difference becomes huge
due to the above mentioned limitation in number of contracts.
Well, I now have to decide, do I prefer my 30000 SEK tradesize since it
gives me a good resolution on 400 SEK shares (one such contract more or less
in a 30000 SEK trade amounts to around 1.3% in accuracy in the valuebased
contribution). Or do I prefer a tradesize of 3000SEK which gives me the
possibility to have old contracts valued to the same value as current
contracts, but at the same time introduces a 13% accuracy problem for
rounding of 1 share for 400 SEK shares.
Ah well, just wanted to give you the knowledge on a possible trap, and
another example on how the ridicoulusly low accuracy setting in Tradestation
can affect us.
Anyone backtesting out there that has suggestions on the solution?
--- Mats ---
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