Understanding Portfolio Backtesting: Difference between revisions
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== Understanding Dynamic Portfolio == | == Understanding Dynamic Portfolio == | ||
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* Overall portfolio performance | * Overall portfolio performance | ||
== Portfolio Backtesting == | == Portfolio Backtesting == | ||
Portfolio backtesting offers a number of advantages: | Portfolio backtesting offers a number of advantages: | ||
* Backtesting a strategy on a single instrument may not produce enough trades to distinguish a pattern from a coincidence | * Backtesting a strategy on a single instrument may not produce enough trades to distinguish a pattern from a coincidence. | ||
* Backtesting a strategy on a number of instruments is more likely to reveal any shortcomings and helps to avoid over-optimization | * Backtesting a strategy on a number of instruments is more likely to reveal any shortcomings and helps to avoid over-optimization. | ||
* A robust strategy is likely to demonstrate consistent profitability across various instruments | * A robust strategy is likely to demonstrate consistent profitability across various instruments. | ||
* By backtesting on a diverse portfolio, the instruments most suitable for the particular trading strategy can be selected | * By backtesting on a diverse portfolio, the instruments most suitable for the particular trading strategy can be selected. | ||
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Batch Portfolio Backtesting, also known as Basket Backtesting, evaluates each strategy separately and then compiles the results. | Batch Portfolio Backtesting, also known as Basket Backtesting, evaluates each strategy separately and then compiles the results. | ||
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In addition to the performance of a particular instrument, portfolio drawdown or other portfolio performance aspects can be taken into consideration when making entry and exit decisions. | In addition to the performance of a particular instrument, portfolio drawdown or other portfolio performance aspects can be taken into consideration when making entry and exit decisions. | ||
== Portfolio Backtesting Diagram == | == Portfolio Backtesting Diagram == | ||
[[File:portfolio_workflow.gif]] | [[File:portfolio_workflow.gif]] | ||
== Script Calculation and Raw Order Generation == | == Script Calculation and Raw Order Generation == | ||
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The resulting sequence of order sets begins with the order set for the symbol 1, followed by the order set for symbol 2, and ends with the order set for symbol N. | The resulting sequence of order sets begins with the order set for the symbol 1, followed by the order set for symbol 2, and ends with the order set for symbol N. | ||
== Symbol Prioritization == | == Symbol Prioritization == | ||
If <code | If <code>[[PortfolioEntriesPriority|PortfolioEntriesPriority]]</code> function is specified within a strategy, the sequence of the order sets is rearranged based on the criteria specified. | ||
This process is illustrated in the Symbol Prioritization section of the diagram: the resulting sequence of order sets begins with the order set for the symbol 1, followed by the order set for symbol N, and ends with the order set for symbol 2. | This process is illustrated in the Symbol Prioritization section of the diagram: the resulting sequence of order sets begins with the order set for the symbol 1, followed by the order set for symbol N, and ends with the order set for symbol 2. | ||
The position of a set of orders in the sequence determines its relative priority: the set of orders for symbol 1 has the highest priority (3), set of orders for symbol N has the second highest priority (2), and the set of orders for symbol 2 has the least priority (1). | The position of a set of orders in the sequence determines its relative priority: the set of orders for symbol 1 has the highest priority (3), set of orders for symbol N has the second highest priority (2), and the set of orders for symbol 2 has the least priority (1). | ||
== Risk Control == | == Risk Control == | ||
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The entire process is repeated for the next bar of each of the portfolio symbol's data series. | The entire process is repeated for the next bar of each of the portfolio symbol's data series. | ||
[[Category:Portfolio Trading]] | [[Category:Portfolio Trading]] |