[R-SIG-Finance] Backtesting / virtual portfolio

[Christofer Bogaso]

Sorry for my ignorance............" are not planning on making 
hundreds of trades per day, " why it is so?

Thanks and regards,


-----Original Message-----
From: r-sig-finance-bounces at r-project.org
[mailto:r-sig-finance-bounces at r-project.org] On Behalf Of Brian G. Peterson
Sent: Tuesday, November 29, 2011 7:43 AM
To: Lui ##
Cc: r-sig-finance
Subject: Re: [R-SIG-Finance] Backtesting / virtual portfolio

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

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