Even when I check “no” on the “use margin” box my simulations still use leverage. See screenshots below. Is there a way to stop this from happening? Thanks, - YT
That’s the nature of using ‘Allow 100% Deviation’ for ‘Exposure after Rebalance’. The step which adjusts transactions to constrain exposure is being skipped, causing your ‘Min Rebalance Transaction’ constraint easily result in deviation from the target exposure. I don’t know of a simple solution to the problem at the moment.
I’m bumping this discussion because I’ve recently started exploring the dynamic position sizer and have encountered the same odd behavior: sim uses leverage even when told not to (sometimes a LOT of leverage–700%)
In my case I have ‘Exposure after Rebalance’ set to ‘Automatically adjust new transactions to remain at 100% invested.’
You can see the sim here: https://www.portfolio123.com/port_summary.jsp?portid=1527025
Obviously not for real money, just trying to get a sense of how the tool works.
Thanks,
Ethan
The realized P&L of your portfolio says it all: you lost all of your money over the course of the simulation. One hard limit set in the system is that the stocks picked during a reconstitution must be bought; new positions bottom out at one share, even if the cost may exceed the funds available. There’s really no other way this simulation could have gone given its settings.
Thanks Aaron, but to be honest I don’t think that the realized P&L of the portfolio “says it all.”
A normal person would assume that if you check “no” in the “use margin” box and the portfolio runs out of money then the portfolio would stop buying stock, not leverage up beyond any realistic limits.
In any case, I have a different port (“YT_6_Variable_50”) that does not run out cash but yet also seems to employ a lot of margin. Is it because I have “Exposure after Rebalance” set to “Allow 5% Deviation?”