Hi, new to Quantopian, really loving how easy it is to create trading algorithms, and hoping I can get an algorithm funded, but who knows. So I made a very basic MA algorithm and ran it from the 08' to 18', and got a return of about 1100%, does that sound right? I ran another backtest that starts before the Financial Crisis (FC) leading to the present, and somehow the algorithm kept losses to less than 5% during the worst of the FC, is there something I'm not accounting for, because if I can gain so much from just a simple algorithm like this I'm just going to leave a chunk of my investments running on this algorithm and should profit a ton, right?
First off, welcome aboard!
The strategy posted above simply invests in AAPL and does a bit of market timing. So, rather than compare it to the benchmark SPY it's fairer to compare with a benchmark of simply holding AAPL. Place the following in the 'initialize' method.
set_benchmark(context.security1)
The returns of the algorithm aren't much different than simply buying and holding AAPL. Run the backtest starting at different dates and sometimes the algo performs a bit better than the benchmark and sometimes a bit poorer.
Moreover, the biggest reason the algo performs well is because AAPL performed well over those years. Try this with a different stock, perhaps IBM, and the results are much different.
In any case, one typically wouldn't want to "leave a chunk" of one's investment in any single stock. Conventional wisdom varies but the max concentration you may want to look at is between 2-10%.
The real gold mine would be to find an algorithm which would have picked AAPL 10 years ago and told you to hold it.
Good luck.
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