Systematic testing?

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henry1224
Posts: 457
Joined: Wed Feb 24, 2016 12:04 pm

Systematic testing?

Post by henry1224 »

what is more realistic, trading the same size lot of shares, the same size amount of capital or the same percentage of account size?

Start with a $200000 account size,sample lot of 10 yrs of data, and close all open positions at the end.
long only.

A: trade 500 share lots and maintain all positions until fully vested
B: trade $20000 per trade and maintain till fully vested
C: trade 10 % of your account per position and maintain 10 positions until fully vested

Your thoughts ?

Henry
henry1224
Posts: 457
Joined: Wed Feb 24, 2016 12:04 pm

Re: Systematic testing?

Post by henry1224 »

here are my thoughts regarding system testing,
1: to test the profitability of the entry signal, I want my positions to be the same size
2: I want to test the system vs a basket of stocks and a large amount of data

In real life trading, I would never have more than 10 open trades going on at once, so I can see the reason for setting max open positions
I also see the reason for setting position size restrictions ,


Any thoughts would be helpful

Thanks

Henry
nibor200
Posts: 63
Joined: Wed Oct 22, 2014 11:03 am

Re: Systematic testing?

Post by nibor200 »

Regarding your option A:
A $200,000 portfolio at 500 shares each would not get anywhere near 10 positions for quite a few of the higher priced stocks so your backtest universe would be smaller than with the other 2 options.

B. Is preferred by many backtesters as a unit approach eliminating compounding of gain or losses from the mix.

C. Is also preferred by many backtesters, because it allows compounding of gains and losses and is how they most likely trade.

I prefer C myself.

Does your phrase "maintain until fully vested" mean those positions could not get stopped out for any reason until some point in time?

Ed S.
henry1224
Posts: 457
Joined: Wed Feb 24, 2016 12:04 pm

Re: Systematic testing?

Post by henry1224 »

Thanks for responding.

A: trading a set number of shares , is not the same trading a $20 stock vs trading a $150 stock

B: trading a set $ amount per trade ,is a more realistic approach, but as the account increases, you will have more open positions.

How many open trades can you handle at any one time?

C: trading a set % of an account , is also a more realistic approach, but as the account increases, one will be making larger and larger investments

Just my thoughts , I compare the results from test b to those from test c

I also compare the win rate, the average gain vs loss, and the sharpe ratio
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