I get the distinction. Still seems pretty simple to me? My point was…It is important to not allow a transaction to occur at a non-existent price…but, I’m not sure it’s all that important to try to mark an illiquid security to an accurate market price within a sim, when no trading’s happening. That’s what I thought Don was suggesting.
So…if the stock doesn’t trade it’s ‘locked.’ The system counts consecutive ‘locked days.’ Maybe every locked stock is held at last value. Maybe it’s held at 50% of last value. It doesn’t really matter…because - when it can trade again, the position is finally traded (sold) at the market price - adjusted by the slippage and transaction cost settings. If it doesn’t trade again for X days, it’s zero’d out.
So…it seems to me, all that’s needed are a) preventing the sale of locked securities and b) a counter that zero’s out those that die after X days. So…If X ‘locked’ days go by and it can’t / hasn’t traded, it’s zero’d out and the portfolio takes the hit.
This is likely the most conservative approach. For example, every trade with zero volume is ‘locked’, and any stock that doesn’t trade for 30 days get’s ‘marked down’ to 50% of last value…and still can’t be sold…then after 90 days any position locked for that entire period gets zero’d out. There are more complex options, but that’s all I was suggesting (I think).
Tom you said: [quote]
But…This raises one other point. For individual user sim’s to be more accurate, the variable slippage formula needs to let users take into account the position size we are trading relative to the daily trading volume. This is in addition to the liquidity of the stock. As our daily position size/total trading volume rises, so does slippage. Allowing users to input a custom 'slippage formula could be helpful. Why does it matter? Slippage assumptions in hi-turnover systems are very, very significant drivers of sim results. Dynamic slippage might reveal things that static fixed amounts aren’t showing.
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I don’t think this will work very well. It would cause a similar problem to the PctAvgDailyTot(20) < 5 liquidity restriction. As the Port grew to higher levels the MktCap of the stocks would have to be higher & higher. That would make it hard to evaluate to past performance of the stocks with the liquidity level I want to buy now, not the ones I will be forced to buy in the future after my Portfolio is 10 times larger. I’ll develop new Ports that invest in larger cap stocks for then.
Here is the Best(Short) Large-Cap. Not on P123, but you can follow it at iM for free and see out-of-sample performance. iM-Best(Short) Large-Cap System | iMarketSignals
I will post every Sunday best shorts for Monday. This model came up with interesting shorts in the last couple of weeks: TWTR and AMZN, which were very profitable. Lots of liquidity too.
Georg
