[R-SIG-Finance] stop and reverse strategy not behaving as I expected

[Kent Hoxsey]

Argh, forgot to include the list as well.
---
Sam- the behavior you describe is precisely how channel-breakout strategies are expected to operate, with a stable no-trade zone between the upper and lower breakout levels (the "channel") to keep you from getting whipsawed during consolidation periods.

If you want a strategy that is always in the market, you might choose a moving average or other index indicator rather than a channel indicator.

Kent


On Jan 18, 2012, at 3:07 AM, Samuel de Bousquet wrote:

> Hello,
> 
> I am a little bit surprised by the behaviour of the below strategy, a
> simple 40 day Donchian Breakout (do not pay attention to the portfolio
> being named Faber).
> 
> Passed the initialization, I would have expected the strategy to be either
> long +1000 contracts or short 1000 contracts as it suppose to stop and
> reverse on the same rule. But is sometimes goes cash.
> 
> Would you understand why ?
> 
> Sam
> 
> Code:
> 
> 
> require(quantstrat)
> require(PerformanceAnalytics)
> 
> 
> 
> # Set initial values
> initDate <- "2010-04-30"
> endDate <- "2012-01-13"
> initEq <- 1000000
> 
> # Pull Yahoo Finance data
> symbols <- c("IEF", "SPY")
> getSymbols(symbols, from=initDate, to=endDate,
> index.class=c("POSIXt","POSIXct"), src='yahoo')
> 
> # Set up instruments with FinancialInstruments package
> currency("USD")
> for(symbol in symbols) {
>  stock(symbol, currency="USD", multiplier=1)
> }
> 
> # Delete portfolio, account, and order book if they already exist
> suppressWarnings(rm("account.faber","portfolio.faber",pos=.blotter))
> suppressWarnings(rm("order_book.faber",pos=.strategy))
> 
> # Initialize portfolio and account
> initPortf("faber", symbols=symbols, initDate=initDate)
> initAcct("faber", portfolios="faber", initDate=initDate, initEq=initEq)
> initOrders(portfolio="faber", initDate=initDate)
> 
> # Initialize a strategy object
> stratFaber <- strategy("faber")
> 
> # Add the 40-day Donchian indicator
> stratFaber <- add.indicator(strategy=stratFaber,
>                            name="DonchianChannel",
> 
> arguments=list(HL=quote(cbind(Hi(mktdata),Lo(mktdata))), n=40),
>                            label="Donchian40")
> 
> # There are two signals:
> # The first is when monthly price crosses over the 40-days Donchian
> stratFaber <- add.signal(stratFaber,
>                         name="sigComparison",
> 
> arguments=list(columns=c("High","Donchian40.high"),relationship="gte"),
>                         label="Hi.gt.Donchian40")
> # The second is when the monthly price crosses under the 40-days Donchian
> stratFaber <- add.signal(stratFaber,
>                         name="sigComparison",
>                         arguments=list(columns=c("Low","Donchian40.low"),
> relationship="lte"),
>                         label="Lo.lt.Donchian40")
> 
> # There are two rules:
> # The first is to buy when the price crosses above the Donchian
> stratFaber <- add.rule(stratFaber,
>                       name="ruleSignal",
>                       arguments=list(sigcol="Hi.gt.Donchian40",
>                                      sigval=TRUE,
>                                      orderqty=1000,
>                                      ordertype="market",
>                                      orderside="long",
>                                      pricemethod="market",
>                                      TxnFees=-5,
>                                      osFUN=osMaxPos),
>                       type="enter",
>                       path.dep=TRUE)
> # The second is to sell when the price crosses below the Donchian
> stratFaber <- add.rule(stratFaber,
>                       name="ruleSignal",
>                       arguments=list(sigcol="Lo.lt.Donchian40",
>                                      sigval=TRUE,
>                                      orderqty=-1000,
>                                      ordertype="market",
>                                      orderside="short",
>                                      pricemethod="market",
>                                      TxnFees=-5,
>                                      osFUN=osMaxPos),
>                       type="exit",
>                       path.dep=TRUE)
> 
> stratFaber <- add.rule(stratFaber,
>                       name="ruleSignal",
>                       arguments=list(sigcol="Lo.lt.Donchian40",
>                                      sigval=TRUE,
>                                      orderqty=-1000,
>                                      ordertype="market",
>                                      orderside="short",
>                                      pricemethod="market",
>                                      TxnFees=-5,
>                                      osFUN=osMaxPos),
>                       type="enter",
>                       path.dep=TRUE)
> 
> stratFaber <- add.rule(stratFaber,
>                       name="ruleSignal",
>                       arguments=list(sigcol="Hi.gt.Donchian40",
>                                      sigval=TRUE,
>                                      orderqty=1000,
>                                      ordertype="market",
>                                      orderside="long",
>                                      pricemethod="market",
>                                      TxnFees=-5,
>                                      osFUN=osMaxPos),
>                       type="exit",
>                       path.dep=TRUE)
> 
> 
> 
> # Set position limits so we don't add to the position every month Close >
> Donchian40
> addPosLimit("faber", "SPY", timestamp=initDate, maxpos=1000, minpos=-1000)
> addPosLimit("faber", "IEF", timestamp=initDate, maxpos=1000, minpos=-1000)
> 
> # Process the indicators and generate trades
> out <- try(applyStrategy(strategy=stratFaber, portfolios="faber"))
> updatePortf(Portfolio = "faber",
> Dates=paste('::',as.Date("2012-01-13"),sep=''))
> 
> # Evaluate results
> portRet <- PortfReturns("faber")
> portRet$Total <- rowSums(portRet, na.rm=TRUE)
> charts.PerformanceSummary(portRet$Total)
> tradeStats("faber")[,c("Symbol","Num.Trades","Net.Trading.PL
> ","maxDrawdown")]
> 
> 
> themelist<-chart_theme()
> themelist$col$up.col<-'green'
> themelist$col$dn.col<-'pink'
> chart.Posn(Portfolio="faber",Symbol="SPY",theme=themelist,log=TRUE, TA =
> "Donchian40")
> 
> 	[[alternative HTML version deleted]]
> 
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