Is there an error in my sample algorithm?

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Is there an error in my sample algorithm?

posted

I am new to this forum, and having just created my first backtest of the sample algorithm, I am finding it hard to trust the results. Where is the error here?

3 responses

Hi Jack,

The backtester allows unlimited borrowing, if you don't constrain it (have a look at your cash balance). So, you are borrowing well in excess of your $10,000 initial capital to fund the trading.

Grant

As Grant said the sample algorithm borrows wildly as it has $1 million as the notional max and min.

I have modified your example to add a limit on buying power based on 50% account margin. I attached a backtest with the calculation. Feel free to steal the source code. Although I can't guarantee that it doesn't have bugs!

I had to increase the starting cash to $100k just because Apple has such a high price. But even so the results aren't spectacular :)

Oops, the logic in my original modification could be better. We don't need to check buying power if we are closing an existing position. Fixed!

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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.