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Chuck,
Now I understand.
I totally underestimated the breadth and sophistication of your
historical database. You obviously have significant time and financial
resources tied up in maintaining your database.
> Now, to answer your direct question. While I use actual prices and
volumes for filtering, I use backadjusted prices for all trading
calculations. As you suggest, that's the only way to compensate for
splits, dividends, cash payouts, etc. when calculating indicators
and/or profit and losses once you actually trade the stock.<
How do you accomplish the above? With two seperate db's... one with
actual price/vol to filter against and create a watchlist, and then a
split-adjusted db that you use the watch list against, ignoring
price/vol metrics since that has already been taken care of in the 1st
scan?
And frankly, I never gave much thought to the effect that
split-adjusted data might have on price/volume filters in backtest
systems.
Thanks for the insight. Very impressive.
Phsst
--- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
<chuck_rademacher@x> wrote:
> Whew... at last someone asked the question.
>
> Phsst asked me: if you really use non-split adjusted data, how do you
> account for stock splits in your
> backtest results where a 2 for 1, or 3 for 2, or 4 for 5 stock split has
> occurred. For example if your system generates a trade when the
stock price
> is at 50, and a 2 for 1 split occurs dropping the price to 25
(reducing your
> position by one-half), how in the heck do you account for the price
> reduction which did not REALLY account for a loss in your 'real life
> account' but which devasted your backtest results?
>
> I've actually commented on this previously, but I always felt like the
> explanation got lost in the shuffle.
>
> For filtering purposes, I use ACTUAL prices and ACTUAL volumes. To me,
> anything else is a waste of time. I've given hundreds examples on this
> board, but I will give some here for completeness:
>
> DELL was actually trading at $9.12 on 19880817. I'm sure you are
showing a
> price of $0.09 or somthing similar in your data.
>
> YHOO was actually trading at $33.00 on 19960412. I'm sure you are
showing
> a price of $2.75 or something similar in your data.
>
> Volumes, as shown in most data vendor's databases are off by the same
> magnitude.
>
> How can anyone possibly use backadjusted prices and/or volumes for
> filtering?
>
> Now, to answer your direct question. While I use actual prices and
volumes
> for filtering, I use backadjusted prices for all trading
calculations. As
> you suggest, that's the only way to compensate for splits,
dividends, cash
> payouts, etc. when calculating indicators and/or profit and losses
once you
> actually trade the stock.
>
> Here again, the accuracy of the data is paramount. Many stocks are
> backadjusted to the point where most data suppliers might show a stock
> trading for $0.10 for almost a month. Two decimal digits simply isn't
> accurate enough. My database carries eight decimal digits for the
> backadjusted data. That way, I can see that a stock went from
0.10000000
> to 0.10600000 to 0.10900000, etc. These are huge moves that
disappear in
> the data of most data vendors.
>
> Are you aware, for instance, that VectorVest rounded backadjusted
prices to
> the nearest ten cents in some of its early data? It's bad enough
that the
> data is stored with only two decimal digits, but to the nearest ten
cents?
> Useless.
>
> I hope that answers your question and I'm relieved that someone actually
> asked it. I'm afraid that I can not apologise for being so
pedantic when
> it comes to the accuracy of data.
>
>
>
>
>
> -----Original Message-----
> From: Phsst [mailto:phsst@x...]
> Sent: Saturday, June 21, 2003 12:24 AM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: Historical volume filtering
>
>
> Chuck,
>
> I've been keeping 'grandkids on steroids' today, so I am a little
> punch-drunk. I've read all the posts on this thread and have a couple
> of comments.
>
> Your database goes back to '85. As I relate to my own situation, my
> average Positionsize in '85 was only a fraction of my Positionsize
> today. I've been backtesting since the late 80's, and have used VOLUME
> for two (2) purposes... (1) to gauge price action, and (2) to gauge
> liquidity as it related to MY POSITION SIZE. On the second count, as
> my personal positionsize increased, so did the average volume in the
> markets.
>
> As mentioned in subsequent posts on this subject, I've filtered both
> my backtests and my actual trades based upon a volume multiple of my
> Positionsize as opposed to x# of shares traded per day, irrespective
> of price.
>
> You and I have both stated that we backtest based upon 'fixed position
> size'. And yet other people are not able to relate to that. They seem
> to think that everyone 'compounds' their trades on a daily basis
> depending upon their account size growth or demise as a direct result
> of trading results. The truth (for me) is a compromise... As my
> account size grows(whether thru trade profits or savings) I gradually
> increase my Positionsize, but it is not directly proportional to
> trading success.
>
> So in my mind, increases in actual market trading volume are just
> about proportional to increases in my own account size, and are
> therefore a 'non-issue'.
>
> Another issue for me is your multiple posts relating to prefering
> non-split adjusted data.
>
> Every time you've mentioned your preference for 'non-split adjusted
> data', I've chosen to ignore the subject rather than to open it up as
> an issue.
>
> But it is time to ask the crucial question... if you really use
> non-split adjusted data, how do you account for stock splits in your
> backtest results where a 2 for 1, or 3 dor 2, or 4 for 5 stock split
> has occurred. For example if your system generates a trade when the
> stock price is at 50, and a 2 for 1 split occurs dropping the price to
> 25 (reducing your position by one-half), how in the heck do you
> account for the price reduction which did not REALLY account for a
> loss in your 'real life account' but which devasted your backtest
results?
>
> Just curious.
>
> Phsst
>
>
>
>
>
> groups.com, "Chuck Rademacher" <chuck_rademacher@x> wrote:
> > I was about to send this email to "b", but I would welcome
comments from
> > anyone else interested in such historical work.
> >
> > At the risk of having some of you ask why it matters, my backtesting
> > generally goes back to 1985. Just yesterday, I posted a message
> to this
> > group saying that I always use one set of parameters across all
> stocks and
> > across all timeframes. One of the downsides of this approach
> (perhaps) is
> > that volume has changed over time. I suppose that one could
argue that
> > volatility changes over time as well. Volatility, however, goes
> through
> > cycles and volume just keeps growing.
> >
> > The question that I have involves volume filtering. To me, it is
> essential
> > that volume filters be applied to actual volume and not backadjusted
> volume.
> > My concern, however, is that if I apply a filter requiring an
average of
> > 300,000 shares, I don't get very many hits back in the late 80's and
> early
> > 90's.
> >
> > I have a solution in mind and would appreciate some input or
> dialogue on the
> > subject. It seems to me that volume filtering should be based
on some
> > percentage of the total volume of all NYSE stocks (for
instance). I
> > haven't done my homework yet, but let's say that the average volume
> today is
> > ten times more than it was in 1985. If I decide to filter today at
> 300,000
> > shares, wouldn't it make sense to filter based on 30,000 shares in
> 1985. I
> > can probably answer that question myself by saying that I don't
> think 30,000
> > would be an adequate filter in 1985. But I could scale it from
> 100,000 to
> > 300,000 progressively between 1985 and 2003 based on mathematical
> equation.
> >
> > You may ask why backtesting to 1985 (or any other date) is
important.
> > There are dozens of reasons, but the most important reason to me
is that
> > prospective investors in any funds that I manage want to see how a
> proposed
> > system would have performed over a statistically meaningful period
> of time.
> > You can argue about the relevance of such information, but THEY
> EXPECT TO
> > SEE IT. For the record, I also think that it is very important.
> >
> > I welcome comments from anyone with an interest or knowledge in this
> area.
>
>
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