Dump it Here

[Lone Wolf]

Out of interest Skate, would you mind showing us the backtest results for the system over the first week? You would expect it to match, it's good to check that it does.

 

[willoneau]

You

Out of interest Skate, would you mind showing us the backtest results for the system over the first week? You would expect it to match, it's good to check that it does.

You already have it , 19 open positions.

 

[Skate]

Out of interest Skate, would you mind showing us the backtest results for the system over the first week? You would expect it to match, it's good to check that it does.

@Lone Wolf a backtest over one week as you said "you would expect it to match" the actual trading results but you would be wrong. I've explained a few posts back that Aimbroker uses dumb maths (in hindsight) it's a very clever scientific calculator calculating the optimal numbers but it's not smart enough to understand how the pre-auction works let alone the (+/- 3% premium) used for calculating the number of shares to buy.

Rob, in a nutshell yes. Sometimes the (+/- 3% premium) rule won't be enough latitude for the position to be executed at the opening price when the Gap-down is in excess of 3% to the last closing price. 99% of the time the (-3% premium) isn't fully exercised (usually it isn't). Finding the right exits for any strategy can be a difficult job resulting in a compromise using "manual intervention" at times. Amibroker uses the opening price for all entries & exits. Backtesting uses "DUMB" maths whereas we are not as privileged, meaning our calculations are done in the heat of the battle whereas Amibroker uses hindsight.

Let's recap
1. Buy positions - the maximum dollar cost is known if the (+3% premium) is fully exercised (usually, it isn't) but the number of shares purchased in Amibroker can differ.
2. ASX uses dumb maths as well as it multiplies the number of shares (X) the opening price to work out the executed value.
3. Let's say the last closing price is $1.00 but in the pre-auction, we offer a (+3% premium) which is $1.03
4. The bet size is $1,000/1.03 = 970 shares to be purchased - let's reverse the calculation 970 shares at 1.03 = $999.10 but here's the rub we don't know the opening price yet.
5. As we don't know the opening price we have no idea what the execution cost is going to be.
6. Let's say for example the position opens at the closing price of $1.00 - we would be executed 970 shares at $1.00 = $970
7. But Amibroker (in hindsight) uses dumb maths to work out the backtest results because "it knows the opening price" so it simply calculates the shares purchased being 1,000 instead of the actual 970
8. One simple mathematical error multiplied many times the backtest results become inaccurate.

Let me give you 3 examples
Let's compare the Backtest results with actually executed positions as displayed in Share trade Tracker (boxed in red) It's also important to highlight that the portfolio manager displays to 2 decimal places in the report but is accurate up to 6 decimal places. (the P&L will reflect the true value when the position is sold)


Backtest results
----> The Amibroker Backtest thinks we have purchased 4,234 shares instead we actually purchased 3,980 shares
----> The Amibroker Backtest thinks we have purchased 1,099 shares instead we actually purchased 1,081 shares
----> The Amibroker Backtest thinks we have purchased 421 shares instead we actually purchased 454 shares

Dumb maths
Actual trading will differ from a backtest results for this & many more reasons. One recent example was an explanation by @Saqeeb about a position in a trading halt as posted below but Amibroker is not smart enough to know this "but take it from me" Amibroker has included that buy position in his backtest report. Amibroker doesn't even take into account that from time to time some companies are suspended from trading but Amibroker will consider the position taken skewing the backtest results.

This week I was able to enter only 5 out of the 6 positions. MSB was in a trading halt on Monday and my offer was only for valid for the day. Therefore it was purged out at the close of the market Monday.

Summary

Backtest comparisons
I've stated before, backtest results mean "Jack" - but backtesting gives an indication between test results using different parameters for evaluation. Comparisons between strategies, not so much.

Skate.

 

[Skate]

It's important to follow the rules
The Action Strategy is a weekly trend following strategy that doesn’t have many rules to follow but some traders don't have enough resilience to do it consistently. Impatience is one of the biggest reasons traders like to override their system because many are not willing to wait patiently & “do nothing” while a trend moves in the right direction. This means we will have lots of small losses, waiting for the movers & shakers to come along.

Skate.

 

[willoneau]

Hi Skate, did you say there was another buy order for Monday?

 

[Skate]

Hi Skate, did you say there was another buy order for Monday?

Yes, there is a buy order for this week & it has been placed. https://www.aussiestockforums.com/posts/1072758/

As you have missed it I might upgrade the graphic so it more prominent - give me a second...

Skate

 

[Skate]

Skate.

 

[willoneau]

Yes, there is a buy order for this week & it has been placed. https://www.aussiestockforums.com/posts/1072758/

As you have missed it I might upgrade the graphic so it more prominent - give me a second...

Skate

Sorry I just assumed it was an example you were giving.

 

[willoneau]

I decided to place order at $990 with limit of 0.87 which gives me a value of $999.19 if filled at 0.87.
Just noticed that the number of shares is 1137 which equals $980. I think it is adjusted for the $20 commission, not $10 when less than $1000.
So changed it to 1143 as per Skate's.

 

[qldfrog]

I missed it too..

View attachment 103539
View attachment 103540
View attachment 103541

Skate.

 

[Skate]

I missed it too..

On each Saturday I'll post positions placed in the pre-auction as I've done here: https://www.aussiestockforums.com/posts/1072888/

1. Friday's Update
Friday will be for weekly portfolio performance updates

2. Saturday's Update
This is when I'll display the screen capture of orders placed in the pre-auction

3. Monday's Update
After the orders have been executed I'll post the "Open Summary" & "Dashboard" as confirmation they have been included in the portfolio.

Let's alleviate confusion
To alleviate confusion I've listed which days I'll be posting & why. Also, I'll update the Action Strategy reporting to reflect the summary of the portfolio to be inclusive of the "trading rules". So you don't have to read them over & over I'll have a separator to acknowledge the updated post follows on from here. The reason for this is when others join in down the track they don't have to search for the trading rules of the Action Strategy.

Skate.

 

[Lone Wolf]

You
You already have it , 19 open positions.

Apologies if I'm overlooking it, but I've looked through all the recent posts and still don't see it.
What I can see is Skate's list of open positions. This is not the same as an amibroker backtest. It's important to know that your explore list matches the backtest. If you get different stocks in the backtest compared to the explore then you have a problem.

It's not clear to me whether the backtest will show Myer as an open position. Skate has said there will be no sell signal. But that doesn't confirm it's not in the backtest. That might just be because Skate will only look for sell signals in stocks he currently holds. Why is this important to me? Only because we might have different opinions on what it means to follow the system rules, and I'm interested to know if that's true.

 

[qldfrog]

Dear Mr Skate and followers,
I did not like too much the known difference between execution with a predefined gap on Monday open (be it 2% or 3%) and the fact backtests took as a fact that buy sell order were executed at open.
The myer business this week for example;
just added some amibroker code in my thread to close that gap: get an ASX compliant pricing to use and use it in backtests
I am in no way an amibroker guru: AB is a tool, not a passion so feel free to tell me if you detect a bug error
@Skate, feel free to cut/paste add to the Bible if you see fit.Have all a great day
Note the code does not really reflect yet the day only execution plan of Mr Skate and match more an open for the whole week execution but better than nothing.

 

[qldfrog]

Apologies if I'm overlooking it, but I've looked through all the recent posts and still don't see it.
What I can see is Skate's list of open positions. This is not the same as an amibroker backtest. It's important to know that your explore list matches the backtest. If you get different stocks in the backtest compared to the explore then you have a problem.

It's not clear to me whether the backtest will show Myer as an open position. Skate has said there will be no sell signal. But that doesn't confirm it's not in the backtest. That might just be because Skate will only look for sell signals in stocks he currently holds. Why is this important to me? Only because we might have different opinions on what it means to follow the system rules, and I'm interested to know if that's true.

I have answered your dilemma before reading it, yes it was bothering me too

 

[Rsthree]

On each Saturday I'll post positions placed in the pre-auction as I've done here: https://www.aussiestockforums.com/posts/1072888/

1. Friday's Update
Friday will be for weekly portfolio performance updates

2. Saturday's Update
This is when I'll display the screen capture of orders placed in the pre-auction

3. Monday's Update
After the orders have been executed I'll post the "Open Summary" & "Dashboard" as confirmation they have been included in the portfolio.

Let's alleviate confusion
To alleviate confusion I've listed which days I'll be posting & why. Also, I'll update the Action Strategy reporting to reflect the summary of the portfolio to be inclusive of the "trading rules". So you don't have to read them over & over I'll have a separator to acknowledge the updated post follows on from here. The reason for this is when others join in down the track they don't have to search for the trading rules of the Action Strategy.

Skate.

I've e done a copy and paste of the strategy into my notes. Sometimes, no matter how simple, you need to review it a few times before it really sinks in. Or maybe I'm just getting old and senile

 

[Lone Wolf]

@Lone Wolf a backtest over one week as you said "you would expect it to match" the actual trading results but you would be wrong.

That was very poorly worded on my part. But probably for the best as you've put forward some good discussion, thanks for that. I was thinking only that the list of stocks to enter should match. I accept there will be position size differences. (I also hadn't considered trading halts) @qldfrog had a recent experience where he found an error in his code by running a test on past data to ensure it matches his original explore list. I feel the importance of checking this is something worth highlighting.

You are correct about all the differences that make real trading deviate from backtests. But isn't that even more reason to compare the live vs backtest results over the same period? Wouldn't it be good to get a feel for exactly how much of your original expected edge has been lost in live trading? Even if only to be able to factor that in when designing future systems and considering if they're worth trading? It looks like there might be some reluctance to show the backtest and it's not like I'm trying to insist on anything so I'll leave it there.

 

[CNHTractor]

On each Saturday I'll post positions placed in the pre-auction as I've done here: https://www.aussiestockforums.com/posts/1072888/

Let's alleviate confusion
To alleviate confusion I've listed which days I'll be posting & why. Also, I'll update the Action Strategy reporting to reflect the summary of the portfolio to be inclusive of the "trading rules". So you don't have to read them over & over I'll have a separator to acknowledge the updated post follows on from here. The reason for this is when others join in down the track they don't have to search for the trading rules of the Action Strategy.

Skate.

Hi Guys, let's not get bogged down - Skate's new entry was clearly shown yesterday.

I am following the Action Strategy with interest. Let's focus on the process of following a mechanical system and the psychological barriers to doing so.

As I write this, it seems to me the amount of questions around placing orders at what price and how many illustrate the "challenges" that one "overthinks" rather than, firstly accepting a strategy has a positive expectancy and therefore following it without exception.

If you do not have a positive expectancy, there is no point in pursuing the strategy.

 

[Lone Wolf]

@Lone Wolf a backtest over one week as you said "you would expect it to match" the actual trading results but you would be wrong. I've explained a few posts back that Aimbroker uses dumb maths (in hindsight) it's a very clever scientific calculator calculating the optimal numbers but it's not smart enough to understand how the pre-auction works let alone the (+/- 3% premium) used for calculating the number of shares to buy.

I thought I might be missing something, I'm often missing something. But I still don't get the statement that Amibroker uses dumb maths. Amibroker will use what we tell it to use. Why can't we do that?

Position size will need some work depending on how many positions you intend to max out at and what happens then. But for now Position size = Equity / 1000.
Entry price for the purpose of determining the Qty of shares to buy = Close rounded up to 2 decimal places + 3%.
Qty shares to buy = The rounded down value of $995 / Entry price as calculated above.
This is what we use to determine the number of shares to buy, so why not tell Amibroker to do the same?
Amibroker will now buy the next open with the same position size as us. The only thing left is to ensure the backtester doesn't enter trades if the open is higher than "Close rounded up to 2 decimal places + 3%", as that the rule we are following.

Am I missing something?

 

[Skate]

Apologies if I'm overlooking it, but I've looked through all the recent posts and still don't see it.
What I can see is Skate's list of open positions. This is not the same as an amibroker backtest. It's important to know that your explore list matches the backtest. If you get different stocks in the backtest compared to the explore then you have a problem. It's not clear to me whether the backtest will show Myer as an open position. Skate has said there will be no sell signal. But that doesn't confirm it's not in the backtest. That might just be because Skate will only look for sell signals in stocks he currently holds. Why is this important to me? Only because we might have different opinions on what it means to follow the system rules, and I'm interested to know if that's true.

@Lone Wolf said:
(a) "Skate has said there will be no sell signal. But that doesn't confirm it's not in the backtest" &
(b) "It's not clear to me whether the backtest will show Myer as an open position"
In a nutshell yes, Myer is included in the Amiboker backtest as an open position & as Myer is included in the backtest it excludes the next position (IGL on Monday)

Cut from the backtest


Backtesting means JACK
I've stated before, backtest results mean "Jack" - but they do give an indication between test results using different parameters for evaluation. The next backtest report, won't include the buy in the pre-auction for Monday as the portfolio is already full.

My Question
Going forward, how will this backtest refect accuracy?

"Skate has said there will be no sell signal"
Ok, let me clear this up. I made it clear that the Action Strategy is not a signal service even though I posted the signals for the first week "as there was nothing to post about" in the hope of keeping the interest alive. With the weekly updates, only positions executed will be displayed so others can follow along without confusion. This means if I don't buy a position there will never be a sell displayed in the weekly updates & this is not to be confused with Amibroker Backtesting or Exploration Analysis signals.

Signals I won't be posting the AmiBroker signals each week with the Friday's updates (to save confusion) but as there is nothing to post the first week, posting the signals is better than nothing. This week there is no shortage of signals.

"It's important to know that your explore list matches the backtest"
No, not really. Amibroker isn't smart enough to know when a stock is suspended or placed in a temporary trading halt. Also another issue, Amibroker takes the positions in order of "PositionScore" ranking without knowing the finer details of the stock or why there was a run-up in price. Just because a buy signal is generated doesn't automatically mean it's a buy without first passing our trading plan. The run-up in price due to "volume & volatility" needs to be understood in finer detail as there are somethings that can't be coded in. Amibroker is merely following a set of "coded rules" & it has no understanding of "market sentiment" that's where a trading strategy crosses swords with a trading plan. (there is a distinction)

"Why is this important to me? Only because we might have different opinions on what it means to follow the system rules, and I'm interested to know if that's true"
The market is completely chaotic & unpredictable due to the infinite amount of information pouring into the markets second-by-second & without the confidence in your trading plan, you won’t keep pulling the trigger. A trading plan is the heart & soul of trading & it shouldn't be confused with a trading strategy as they are totally different beast.

Let me break trading into 3 parts
Being a systematic trend trader there are 3 parts to the equation.
Part (1) Your trading plan has the final say whether you trade the signals as given.
Part (2) Your trading strategy is a signal service with no understanding of "market sentiment"
Part (3) You need to have the necessary funds to action your trading plan/trading strategy.

Skate.

 

[Lone Wolf]

"It's important to know that your explore list matches the backtest"
No, not really. Amibroker isn't smart enough to know when a stock is suspended or placed in a temporary trading halt. Also another issue, Amibroker takes the positions in order of "PositionScore" ranking without knowing the finer details of the stock or why there was a run-up in price. Just because a buy signal is generated doesn't automatically mean it's a buy without first passing our trading plan. The run-up in price due to "volume & volatility" needs to be understood in finer detail as there are somethings that can't be coded in.

"Just because a buy signal is generated doesn't automatically mean it's a buy"
This is an important point that I was not aware of in this discussion. (I probably missed it) I was under the impression this was a purely code based trading system in which you trust the system and take the signals without hesitation. But if there's a discretionary element to stock selection that can't be coded then I understand why the backtest won't match.