a newbie's exploration of the core combination ranking system - background on me

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All,

As I mentioned in an earlier post (see “what forum to use (if any) for documenting my different trials”), I am new to Portfolio123. In subsequent posts I will document my exploration of Portfolio123, especially the Core Combination ranking system. For those of you who are only interested in the results of my tests, you can skip this post. For those who are a glutton for punishment, you can read this post and shake your head in amusement or pity.

I first learned of Portfolio123 from reading Paul Novell’s blog “https://investingforaliving.us/”. (For other newbies like me, your time would be well spent readiing his blog from the beginning in Sep 2010 to now.) I decided to take the plunge with Portfolio123 last March and signed up on the forum. It was part of a evaluation I planned to make on behalf of some investing / trading friends of mine of the different investment / trading platforms that offered backtesting for different investing / trading strategies. I wanted it to be mathematically based and thus objective, and not based on subjective judgment such as charting, as CANSLIM’s method of buying stocks using the “cup-and-handle” chart pattern. I was interested in testing Richard Dennis’s / Michael Covel’s “Trending Following” methods, such as Donchian Channel breakouts, etc. I was curious as whether using stop losses (either point of entry or trailing) protected profits better than not using them, reading numerous times from the different traders to “cut losses quickly and let winners run”.

Thus I wanted to focus primarily on trading systems. I was not interested in day trading, but investing / trading on longer time frames (over several days, weeks, or months at a time). I had in mind trying out platforms such as the ones mentioned in the article “7 Best Stock Backtesting Software For Trading Strategies 2021”, https://www.liberatedstocktrader.com/best-stock-backtesting-software-strategies/. Because Paul Novell liked Portfolio123 so well, I made a point of including it in with the others. I decided to tackle it first, and signed up in late March 2022.

What a surprise it has turned out to be! It is nothing like I expected. I spent at least a week being completely lost, trying to figure out things. Early on I naively tried to implement a test for trading Donchian channel breakouts, but soon gave up. Later when I found out that P123 doesn’t (easily?) handle investing / trading around the different trading days of the month, I almost said “good riddance”, as a number of investing / trading methods I wanted to backtest was based on the trading days of the month. I decided to stick it out, though, because there seemed to be tremendous power in the tool, even if it could not (easily?) test investing / trading methods based on the days of the month.

I have been reading everything on the web site I can find to try to make sense of the service. MANY years ago I remember learning that many people’s careers go through 4 phases: (1) panic – “Oh my god, I can’t do this! I’m an imposter and everyone will see.” (2) challenge - “I CAN learn this!” (3) competence - “I’ve got this!”, (4) boredom - “I am so tired of this, it’s time to do something new.” Only recently have I started to exit the panic phase and started into the challenge phase. I still get frustrated with not knowing how to do things, but I am hanging in there.

If anyone else can recommend anything, either on this web site or somewhere else, like a “Portfolio123 for Dummies” book, to help better understand how to use the site, I am quite interested.

My next post will begin documenting what I have learned, starting with the Core Combination.

Cary

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The “Portfolio123 for Dummies” book is essentially this one: https://www.portfolio123.com/doc/side_help_item.jsp?id=11 or, if that link doesn’t work, click on “How to Build a Stock Strategy” here: https://portfolio123.customerly.help/library/learn-more . . . but maybe you’ve already read that . . .

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Thanks, Yuval,

Yes, I have read that write-up. Maybe I need to go back and reread the manuals I have and perhaps they will make more sense. Thank you again for your help.

Cary

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Cary,

Just a few thoughts in this regard:

First, Yuval is particularly good at assessing factors and I suspect he has even created a few factors that are not generally know (and that work). So starting with his Core ranking system is a good idea. Following his posts and any other writings about factors is also a good idea.

I am not sure if Yuval (Marco or other members) would fully agree with my personal take but most people have mentioned the usefulness of the rank performance test at some point in the forum.

It is a great tool just the way it is. IMHO, the human brain (e.g. pattern recognition) can use this without any formal math.

But also there are numbers posts about how the rank performance test can be easily loaded into Excel and used in formal, mathematically-correct ways. I will stop here out of fear of generating some sort of trivial debate over which methods are better. I will say that Yuval and Dan have recently posted some good ideas on the subject. And that there are other formal methods you could use.

Some formal mathematical ideas from Yuval and Don on how to use the rank performance test here: https://www.portfolio123.com/mvnforum/viewthread_thread,13442

I see this as P123 greatest strength. Just looking at the rank performance test usually tells you what you need to know and you can make it as mathematically formal (and complicated) as you want to with Excel downloads, Python, SPSS or whatever.

And you can then backtest your idea! Technical timing (or even factor engineering) is not my strong suit and probably others can help you more in that regard. But my suggestion is learn (and maybe even master) some of the possibly new-to-you tools at P123—including the rank performance test. Maybe download some of that data into Excel if you want to expand the usefulness of the data in the rank performance test.

Jim

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Carymac,
good post.
I am an “old” P123 user but have not used the service for 2 years or so.
Coming back recently, I felt similar to what you are describing. I am basically lost and can’t formulate neither a strategy, model or ranking anymore.
For first time users, the site is awfully intimidating.
Before you can use it for anything “real life” “real data” “real benefit” you need countless hours - I’d say months at the minimum - to feel comfortable on the site. Mathematically inclined users or programmers will have a solid advantage, but this is a small minority, I think.

Indeed, I think there IS a need for a “P123-for Dummies” book or “P123 for the real beginner” manual (spiral bound) that can be placed next to the PC when trying to make sense of the site. I’d even happily pay for such a manual if it was availabe.

Maybe Yuval can chime in.

But don’t give up.
It is doable but requires lots of effort and perseverance.

Cheers,
Werner

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Yuval,

neither of your 2 links work, unfortunately.

Werner

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Wow!

Thanks, everyone for your replies. I will read all of the referenced material.

Mr. “jrinne” (Jim), Thanks for your input. Early on when I joined P123, I read everything I could find that Yuval had written, as I could tell he was a really smart guy, and I understood about half of what he wrote. (I have made it a goal to eventually get to the point where I can understand maybe 2/3 of what Yuval wrote.) Only recently I started reading the different posts in the threads. I quickly learned just how many incredibly smart people there are on this forum, including yours. Your posts stood out in that I understood maybe 20% of what you wrote. But I am determined to continue learning so that maybe I can understand 30%!

My background is not math-intensive. My Bachelor’s degree is in Computer Science from Texas A&M in 1975, and a Masters in Software Systems from Mercer University. I had one course in probability and statistics at A&M. My work career was exclusively defense contractors. I focused primarily on operating systems. The programming languages I used were Fortran, Ada, C, a little C++. My masters project was in Java. I have no experience in Python, but what I have seen of it, it resembles Java, so I could probably learn easily enough. I have absolutely NO background in artificial intelligence (and am only somewhat acquainted with natural intelligence in myself! :slight_smile: So you can see my disadvantage in trying to understand your and other’s posts. But I will give it the old college try.

Werner, well, I won’t be entirely alone in this journey on learning. I suspect that with your having used P123 before, it will come back quickly to you, and then you can explain it to me. FWIW, I was able to access the two links Yuval provided.

Thanks, again, everyone

Cary

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Welcome again Cary :slight_smile:

I appreciate your writing about your experiences and background, it helps with understanding various perspectives.

I have found the path on P123 (and investing more generally) to be very non-linear. I like your 4 stages above; for me, the steps have been roughly as follows:

  1. Early luck (seems easy)
  2. Rude awakening (no, this isn’t easy at all)
  3. Frustration and throwing in the towel (and dabbling in other asset classes)
  4. Slowly coming back, revamping and “deep diving”, learning from my mistakes and taking in everything from successful investors
  5. Back “in”, realizing that investing is truly a journey, and that I am but a student of this ever-changing phenonemon known as the stock market
  6. Accepted that things can change at any moment, any successes today can be gone tomorrow

As you’ve mentioned, the resources on P123 are a great start. I find great value in this forum; I’ve learned so much from others here, and have been exposed to other ways of thinking I had not previously considered.

Translating some of your favourite strategies from other investors is also a great exercise, looks like you’ve been doing some of this already with the AAII screens. I started with the Acquirer’s Multiple, Magic Formula, and some of O’Shaughnessy’s strategies.

Challenge conventional wisdom! There are countless adages in finance, some have aged well, others not so much. Use the power of P123 to test these adages with your strategies. i.e. is the trend really your friend? Are moats everything? Is intrinsic value the discounted value of future cash flows? Depending on your investing style, some of these adages may help, or they may not.

Good luck, looking forward to reading about your experiences.

Cheers,
Ryan

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There are some great threads that this forum has produced by users, both past and present, that have been critical to my experience and understanding in P123. When the collective brainpower of the P123 community starts working on a problem, it’s impressive. Unfortunately, I didn’t bookmark them. As they come to mind I’ll try to dig them up and re-post them. Maybe someone else can remember some of the “Greatest Hits” threads.

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I am always eager to read and learn from others. If you can remember what they are, please provide links to them for me and other newbies like me. I have a file in a folder on my computer named “forum_threads_notes.txt” dedicated to the threads I have read here on P123 that I want to remember. In the file I simply list the title of the thread, the date, a link to the thread on P123, and extracts from the thread. It is starting to fill up quickly, as I am learning so much. And thanks to the kindness of others who have already provided links to threads that I know will be helpful, once I take the time to read them, I will have learned even more, and I will have more entries in my file! So, to repeat myself, I definitely hope that you and others will continue to provide me and other newbies like me that kind of help.

Cary