My Buy and Sell Rules

Research
12

I found that some of Denny’s sell rules in a port which I run using the TF-12 excellent ranking system could be replaced with some much simpler rules that yield >10% better annual return. There’s a 100% increase in turnover as well, but the port only holds 7 stocks.

Old Sell Rules:

Rank < 99 & nodays>20
GainPct< -20
PctFromHi < -15 & Rank < 99.

New Sell Rules

Rank < 99
GainPct< -15

With the new rules:

Annualized Return [color=royalblue]155.06%[/color]
Annual Turnover 688.96%
Max Drawdown -20.21%

The Old Rules:

Annualized Return [color=royalblue]143.56%[/color]
Annual Turnover 585.12%
Max Drawdown -20.09%

(Sim Date: 10/13/01 - 10/14/06)

13

Jerrod -
Could you explain how you toggle on and off your common buy rules. I have been trying to do this with the Excel Add-in, but have not quite figured it out. It would make my life a little easier. I do alot of cutting and pasting. Thanks

14

[quote]
Jerrod -
Could you explain how you toggle on and off your common buy rules. I have been trying to do this with the Excel Add-in, but have not quite figured it out. It would make my life a little easier. I do alot of cutting and pasting. Thanks
[/quote]Glad to, William.
Each Buy rule is a compound statement that is true if either part is true. So instead of a simple filter like (Rank>99), I would write
0 or (Rank>99), which is logically equivalent.

To disable the rule, change the 0 to 1. Now that compound rule is always true, thereby disabling the filter portion (Rank>99).

Sell rules work similarly, except that the compound is true only if both parts are true. Thus a filter (Rank<99) becomes
1 AND (Rank<99). To disable the filter, change the 1 to 0.

There is a feature request here that would simplify this procedure by adding a checkbox or special “COMMENT” character, but it hasn’t generated much interest.

15

Looks like a lot of users are using this technique or turning buy/sell rules on/off. While it works, it makes sims run slower because the logic still gets executed. We’ll bump up the requested feature priority.

16

Jerrod & William,

Have you ever tried something simpler? For simplicity, you cannot beat the followings: “Rank > 99” (to enable the buy filter) and “Rank > -99” (to disable the buy filter).

Old buy rules:
0 or (Rank>99) … // Enable
1 or (Rank>99)… // Disable

New buy rules:
Rank>99…// Enable. Buy, if rank is higher than 99.
Rank>-99…// Disable. Rank > -99 is always true.

Old sell rules:
1 AND (Rank<99)…// Enable
0 AND (Rank<99)…// Disable

New sell rules:
Rank<99…// Enable. Sell, if rank is lower than 99.
Rank<-99…// Disable. Rank < -99 is always false.

Advantage #1: Your sim will be simpler and easier to write.
Advantage #2: Your sim will be easier to manage. There will be no more confusion about zeroes and ones.
Advantage #3: Your sim will be Fast.
Advantage #4: Save time and money. There will be no need for the feature request that Marco has just bumped up to higher priority.

All of the above should work in Excel.

I hope this helps.

Robert

17

Robert,

Your recommendation will work fine for many of the simpler Buy and Sell Rules.
Buy is not workable for more complex Rules and even some simple ones. A few examples:

Buy Rules;
MktCap > 50 & MktCap < 500
SecWeight <15
MaxCorrel(60,1) < 0.5

Sell Rules;
NoDays > 20 and GainPct < BenchPct
PctFromHi < -20
Pr4W%Chg / 20 <.1 & NoDays > 30

You could reverse the > and < signs on some of them and make it work, but that is not simpler, and it is easy to over look when changing it back.

Denny :sunglasses:

18

Denny is right on both counts regarding the 0/1 switch.

First off, it’s easier to spot whether a rule is active or not just by looking at the first character.

Secondly, it’s easy to copy & paste the switch into all rules when developing a new sim.

Finally (with apologies for the cheap shot), without usiing the switch method, how would you deactivate these recently posted candidate rules?

(GainPct < -14 & Rank < 95) OR (GainPct < -20 & Rank < 98) OR Rank<90

or

Eval(HighestBar(#High,25,0)=1,1,0) OR Eval(HighestBar(#High,25,0)=2,1,0) OR Eval(HighestBar(#High,25,0)=3,1,0) OR Eval(HighestBar(#High,25,0)=4,1,0) OR Eval(HighestBar(#High,25,0)=5,1,0) OR Eval(HighestBar(#High,25,0)=6,1,0) OR Eval(HighestBar(#High,25,0)=7,1,0) OR Eval(HighestBar(#High,25,0)=8,1,0) OR Eval(HighestBar(#High,25,0)=9,1,0) OR Eval(HighestBar(#High,25,0)=10,1,0) OR Eval(HighestBar(#High,25,0)=11,1,0) OR Eval(HighestBar(#High,25,0)=12,1,0)

19

Denny & Jerrod,

I see the point you guys have made.

Naturally, the more complex buy and sell rules you guys create, the more likely that you guys will need additional features, like check boxes, just to be able to manage those highly complex rules.

Maybe I should use complex buy and sell rules, too. However, currently, I make serious attempts to keep them as simple as possible. I’m concerned about using too many rules, because too many (or too complex) rules mean data mining. And data mining usually leads to high sim returns, but low port returns. And if returns on my ports are low, then why did I go through this whole exercise (of creating complex buy and sell rules)? And, if I didn’t need the exercise, then why did I ask for the additional feature Marco has talked about?

I’m still undecided on this issue. As soon as I have some time, I will run a large number of sims, just to help me decide if I can keep all of my buy and sell rules simple. In my whole life, I’ve always tried to keep things simple.

But I see the point you guys have made.

Robert

20

Good morning Dan:

I’m rebalancing my portfolio and got a Sell on one of the stocks. The reason: Buy/Sell Difference. The rebalance didn’t replace thios sell order with a corresponding buy.

Any thoughts.

Judy G

judyg@mechanicalwoman.com

21

Hi Denny,

I would like to ask how to search for higher values of “Gain/Stk/Day” in Sims/Ports ?

Happy Trading
isam

22

Hi Isam,

The answer you require is contained on page 1 of this thread, in Denny’s post. Re-read his post and put your thinking cap on; and there, as far as I understand your question, you will likely find the answer.

:slight_smile:

23

Isam,

There is no way to search the public Sims or Ports for high values of Gain/Stock/Day.
You can narrow your search by adding a high value of Sortino Ratio such as 4.0 to your search criteria. Sims and Ports that have a high Gain/Stock/Day inevitably also have a high Sortino Ratio. Then you can calculate the Gain/Stock/Day from the Statistics; Trading page.

I have a Feature request to add the Gain/Stk/Day calculation to the Summery page. You can vote for it here:

http://www.portfolio123.com/feature_request.jsp?poll=249

Denny :sunglasses:

24

Hi Denny & jtbaccarat,

Thanks a lot for your highlight.

isam

25

Bumping this thread for beliving it can be extremely useful. Thank you very much for sharing!

26

Denny:

 Thanks for sharing so much. It's appreciated.

Best,

Bill

27

16 Years later… Thank you Denny.

28

Thank you, Mr. @AndorraInvestor , sir, for bringing this thread to the present and thus to my attention. I had been getting discouraged over the months because of my lack of progress and had considered leaving Portfolio 123. But in the past few weeks a lot of things have happened to make me think there is hope for me yet!

Thanks, again!

Cary

29

Thank you for sharing!!
It would be interesting if you could publish some screenshots of the strategy from the simulator, just to see how it does in terms of turnover, overall winners and annual returns?
And do you sometimes run into problems with your buy when using “AvgDailyTot(20)"? I see that sometimes stocks -that are almost non-buyable- can have very high volumes for short periods of time. How about Mediandailytot(120)>( 70* 1000) and StaleStmt = 0

I added the buy and sell rules indiscriminately in my test system with United States (Primary), but it did not give much better results in the period 06-22:

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Could bee to much into cash:
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Buy : Rank > 98 and Price > 1 and MktCap > 50 & MktCap < 500 and AvgDailyTot(20) > 100000 and Pr4W%ChgInd > 0
Sell : Rank < 99 or PctFromHi < -15 and GainPct < BenchPct & NoDays > 30 or Pr4W%Chg /20 < 0.1 & NoDays > 20

Original system, but with the buy AvgDailyTot(20) > 100000 and sell Rank < 99

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I will keep on testing different settings :slight_smile: And again, thank you for sharing!

30

Thanks for sharing @Whycliffes !!
Seeing the very high annual turnover from your screenshots, wouldn’t it be more realistic to generate the simulation with VARIABLE SLIPPAGE?

31

I would be careful with too many rules. As you can see from your own backtests, it increases the annual turnover.
Also, rules like PctFromHi < -15 don’t make much sense in a small- to micro-cap universe as these stocks are very volatile and you might miss an upward trend following a 15-20% drawdown.
Most of my models only have one main sell rule (Rank < 98) and that allows me to keep the turnover to less than 400% per year.
hth,
Florian