[R-SIG-Finance] Backtesting / virtual portfolio

[Brian G. Peterson]

On Tue, 2011-11-29 at 01:00 +0100, Lui ## wrote:
> after backtesting strategies for a while I am wondering how to
> actually "prove" they "kind a work" in a "as realistic as possible"
> market environment. Even though I know this is not exactly related to
> R - it is just one step further. Do you have any suggestions for
> Portfolio Simulations that could be shared with others online - and
> enable a real time (or close to real time) portfolio tracking? I came
> across www.stocktrak.com but I do not know whether that is the right
> thing for me - especially since I am mainly interested in German
> Future contracts and $60 per month seem quite expensive...
> The actual underlying issue is "building up some credibility" with
> respect to the buy/sell suggestions a certain trading strategy may
> suggest - I don't think my bank account statement will serve that
> purpose... I was looking for something more transparent that could be
> incorporated into a website...
> 
> Thanks a lot for your suggestions and help - and again my apologies -
> its not directly R, but closely linked to the topic... :-)
> Lui

Definitely not R, but here are a couple thoughts:

Many brokers, including InterActiveBrokers, support paper trading, where
you can trade in real time and keep track of P&L.  If you place
realistic orders (limit orders of reasonable size), then you can assume
that your paper trading, if done in real time, closely mimics your
potential results on a live account during that period.

I suspect that if $60/month is too much to spend for a useful tool, you
need to consider whether you are ready to be a professional trader.  We
spend thousands of dollar per month just on data, and thousands more on
trading infrastructure, for a very small trading operation.

If you are making realistic assumptions and are not planning on making
hundreds of trades per day, you should be able to get more than 90%
correlations between backtests and production in R.

Regards,

   - Brian 
-- 
Brian G. Peterson
http://braverock.com/brian/
Ph: 773-459-4973
IM: bgpbraverock