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A simple algorithm purchasing on a fluctuating stock
Wassaf Farooqi
posted Aug 24, 2012

I wanted to see what would happen if you let a stock run through the waves of time. It's designed to sell after the price goes up by 25%, and then rebuy when the price is 80%.

The glaring flaw is that if it goes into a stock that just tanks, well, you lose all your money.

I have the stock purchase go on even minutes because I wanted to make sure the orders didn't go into the negative. After working for EMC for so many years, part of me wished I did this, so I wanted to see what happens if I listend to my gut and put the money in. :)

2 responses
Scott Sanderson
Aug 24, 2012

Hi Wassaf,

Thanks for sharing this. I notice there's a long period in the middle of your test where you don't buy or sell anything. I'm guessing EMC's price was relatively stable during that period. I'd be curious to see how this algo behaves behaves if you made the buy/sell triggers closer to the starting price (eg. 115% buy and 90% sell). You also mention that you added special logic to ensure that your orders don't go negative. Was this part of your strategy? The backtester will allow you to hold a negative position in a security, effectively simulating a short position.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

Wassaf Farooqi
Aug 24, 2012

Not going negative was part of the strategy - I don't have a strong understanding of short positions to make sense of what I'm doing. The long flat period is because I wasn't holding any positions at the time. Adding some more stocks to go with the same algorithm should reduce that downtime.

I'm also curious about making the spread closer to see what happens... let's clone the algorithm and find out!

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.