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Portfolio123 » List all forums » Forum: Screener » Thread: New Sim Buy Rule that Improves Drawdown? |
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Total posts in this thread: 6 |
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scottkissinger
Advanced Member
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I was thumbing through the feature requests and came across a mention of a buy rule. Open (-1) > Close(0) * X This requires the Open to be at least as high as the previous day's close times X before the sim will buy. X=0.95 was the mention in the feature request, although the simulations I did showed X=1 might be a better choice. I always make my buys / sells after the open in the late a.m., so I could evaluate for this manually in my portfolios. When I used this buy rule in my sims, it seemed to improve my drawdowns ( -32% to -24%, -34% to -23%, etc.) and improved my win ratio by a couple of percentage points on average. The results were mixed on improving overall annual returns...it helped slightly in some sims and hurt slighty in others. Turnover remained about the same also. Has anyone else tried this rule? It seems to make a lot of sense. Scott |
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crakes
Advanced Member
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Hi Scott, If I understand correctly, Open(-1) is the day after the supposed buy signal, which would be day 0 (and day 1 would be the day before the buy signal). The question is whether or not this is causing a look ahead. If it is, then you are automatically scooping up a one day gain when Open(-1) is greater than Open(0). Check the sim transaction details to see if this is happening - it could explain the improved peformance. Carl |
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scottkissinger
Advanced Member
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Carl, maybe you're right. I'm not sure.... Marco, could you shed some light on this question? My situational usage of Open(-1) is as follows and I am wondering if this is correct. In a simulation, I am using as a buy rule: Open(-1) > Close(0). My entry price is the next day's (Low + High) / 2. In reality though, I am entering sometime in the late morning, so (L+H)/2 is an estimate. If the open is higher than the previous day's close, then I buy. If not, then I don't buy. Two questions: 1) Is the average of the high and low price, the NEXT day's low and high after the buy signal? 2) Is using Open(-1) a "look-ahead" in this situation? Thanks in advance, Scott |
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Capnpaul
Advanced Member
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Scott If you test open(-1) in the screener it returns a null in all cases. example: Open(-1) > Close(0) returns a zero count when tested against the univese. The screener is a great place to test your ideas, as it sheds some light on what P123 is doing internally. HTH |
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scottkissinger
Advanced Member
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Thanks for the recommendation on using the screener. If you set the screener for today's date, then it returns zero stocks. But, I did an experiment and set the screener for 4/19/2007 and tried: 1) Open(-1) by itself....returned 6919 stocks 2) Open(-1) > Close(0)......returned 4694 issues It seems like this is doing what I want it to do as explained above. |
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DennyHalwes
Advanced Member UNITED STATES Joined: Apr 28, 2004 Posts: 1530 Status: Offline |
Scott, Open (-1) > Close(0), if used as it was intended to be used, does not have look ahead bias. The assumption is that in the actual trading of a Port you will get the recommendations, and wait until after the next day's open to decide if you are going to buy them. If the open is greater than the close you will buy, if it isn’t you won’t buy. The key is that you have to wait until the next day's open to decide. Then in your Port you can go to; Transactions: Edit, and input the actual trades you made. If there were recommended stocks that you didn’t buy, you can get new recommendations to try and buy the following day. Using Open (-1) > Close(0) in Sims was intended to simulate the above trading approach. So if you find that it reduces the drawdown in your Sims then it should be representative of what you could expect to achieve by waiting until after the next day’s open before deciding what to buy. This doesn’t have look ahead bias because you are waiting for the information to become available before you make your decision, and the Sim simulated that correctly. Just remember, it you use Open (-1) > Close(0), as a buy rule in a Sim then you need to remove it before you turn the Sim into a Port. On any day that you "Get Recommendations", a Port will never know what the next day’s open will be! Denny  ---------------------------------------- "The significant problems we face cannot be solved at the same level of thinking that we were at when we created them". Albert Einstein ---------------------------------------- [Edit 1 times, last edit by DennyHalwes at Apr 23, 2007 10:57:34 AM] |
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Re: New Sim Buy Rule that Improves Drawdown?
