I have used indicators on daily charts as buy and sell signals on different market, and would like to know how often I should rebalance my portifolio.
For example, there are 4 stocks on my portifolio,
A: 35% (Ideal)
B: 25% (Ideal)
C: 20% (Ideal)
D: 20% (Ideal)
Case 1
After 2 days, if the signals on holding positions do not change, but prices are changed
A: 40% >> 35%
B: 15% >> 25%
C: 25% >> 20%
D: 20% no change
Should I rebalance my portifolio?
Case 2
After 2 days, if the signals on holding positions change, C should be removed.
A: 40% >> 35%/(35% + 25% + 20%) = 44%
B: 15% >> 25%/(35% + 25% + 20%) = 31%
C: 25% >> 0%
D: 20% >> 20%/(35% + 25% + 20%) = 25%
Should I rebalance my portifolio?
Does anyone have any suggestions?
Thanks in advance for any suggestions :>
When should I rebalance my portifolio?
When you talk about backtesting, the today result from backtesting would be different from last week historical result, so how do you look at backtesting? that is the main questions, and is similar to this question on when to rebalance your portifolio.sluggo wrote:I would program my trading system into a backtesting software program and then look at the historical results.
Do you have any suggestions?
Thank you very much for any suggestions :>
For example, there are 4 stocks on my portifolio,sluggo wrote:I would program my trading system into a backtesting software program and then look at the historical results.
A: 35% (Ideal)
B: 25% (Ideal)
C: 20% (Ideal)
D: 20% (Ideal)
On 25 Mar, 2014, would you adjust the ratio back to ideal one?
A: 34%
B: 26%
C: 23%
D: 17%
On 31 Mar, 2014, would you adjust the ratio back to ideal one?
A: 37%
B: 23%
C: 21%
D: 19%
Does anyone have any suggestions?
Thanks in advance for any suggestions :>
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This is the type of question Sluggo suggested might be answered best by historical simulation. You could find that there is an optimal rebalance frequency that is at an intersection of the benefit gained by maintaining the desired allocation and the cost of trading to that allocation. The existence and location of such an intersection are functions of how much it costs to trade (in both commissions and market impact), how the strategy performs under an optimal allocation, the sensitivity of the strategy to holding non-optimal allocations, etc. Historical simulation is one way to find an answer to questions like these that might be difficult to gain insight into otherwise.
Backtesting is a tool to help answer the question, "What would have happened if...?" It is no guarantee that the insights revealed by answering this question will be valid going forward, but it is an improvement over having no information about the historical performance of implementing various trading policies.When you talk about backtesting, the today result from backtesting would be different from last week historical result, so how do you look at backtesting? that is the main questions, and is similar to this question on when to rebalance your portifolio.
Backtest is not the answer for this question, such asJake Carriker wrote:Backtesting is a tool to help answer the question, "What would have happened if...?" It is no guarantee that the insights revealed by answering this question will be valid going forward, but it is an improvement over having no information about the historical performance of implementing various trading policies.
I would like to go ABC shopping mall,
[Me] do you know which direction I should go?
[You] Since Earth is round, you can test all directories from here [backtest], then you would find your way to get there.
[Me] Thanks you
Do you have any suggestions?
Thank you very much for any suggestions :>
In my opinion it's okay to sort the ideas-to-be-tested beforehand.fab1usa1 wrote:Yes, go in ALL directions. Your backtest results will tell you which direction was the most profitable or least painful, or, or, or... whatever metric is important to you!
In my opinion it's okay to try the ideas which seem the most promising TO YOU, first. Then, when they trounce the next four, or the next forty-four, or the next four hundred ideas-to-be-tested, you can pump your fist triumphantly and say I KNEW IT!