For over a couple years now I have been a beta-tester with Quantopian. They do TA backtesting. The platform signup and all backtesting is free. Their data starts in 2002, minute bars or price and volume, and you can share/clone algos if you like. They have nifty ways of simulating realiastic fill prices and volume. They are linked to IB and I think when I looked into live automated trading it was $150 per month or something like that. Flat rate regardless of portfolio size and on top of that just your standard IB brokerage + commission fees.
So this got me thinking that a platform like that and P123 is a match made in heaven. I am thinking that there is a huge amount of alpha left on the table for the taking.
So P123 gets daily re-ranking. We build a model and test it with daily data using open + slip, daily hi/low, etc. etc. Then our trade list is fed into Quantopian without execution prices, just the list of stocks to be traded on those days (or possilby throught the week if using weekly re-ranking). From there we have a playground of intra-week or intra-day algos to backtest to see if we can squeeze more returns with intelligent intraday algos. Also, we could have a very realistic view of slippage based on capital being traded. But here is the real kicker…
What if we could use Quantopians pricing data to synthetically update ranking systems intra-day? You have a mean-reversion system that buys pullbacks. Maybe you have a few short-term TA indicators in your ranking system. So a buy is triggered based on Friday’s closing price - but is Monday’s open still a buy? What about at 11am? Just before the close? Is Tuesday a better buy than Monday? Now you can buy throughout the day at exactly the point in time that the stock ranks are highest.
This has many applications. For instance, perhaps you want a portfolio of 20 stocks which is rank=>98 in the Russell 1000. You sell as ranks go below 95. But what if instead you selected stocks ranked greater than 99.5 (keep your sell rank the same), which means you only buy the top 5 ranked stocks at first - and then as soon as a new stock makes the top 5 you buy it until you have 20 stocks. Even with weekly re-ranking of P123, we have a synthetic intra-day re-ranking system that allows for some pretty interesting portfolio strategies. P123 becomes the cornerstone of the strategy while Quantopian partners up to be the trading execution platform.
There are algos in there that allow you to go long/short and it will even ensure the $ amounts are balanced as you accumulate or distribute…all kinds of stuff. You need to know Python programming language though.
Any thoughts on this?