I cloned this basic algorithm from the tutorials and the only thing i edited was the :
vwap=data[context.aapl].vwap(x), where i took x and ran five different backtests with x being 1, 3, 5, 7, 15. What I found was that the more i increased x, the higher returns i would get, so much so that my returns went from 3% with x as 2 to 65% with x as 15. Why is it that with AAPL, a simple momentum trading algorithm like this, where the only variable i change, the Volume Weighted Average Price, can bring back such high returns compared to the benchmark? Am i doing something wrong?
Momentum Trade (AAPL)
One of the main reasons this performs so well is that you are trading Apple stock. It's tough to lose trading AAPL. The benchmark is the S&P 500, so when AAPL significantly outperforms the S&P your results should almost always look good no matter the strategy (they do). That's not to say simple strategies never work or that your strategy is not good, it just performs as expected. To more thoroughly test different strategies you want to probably trade S&P itself or use set_universe and trade a range of securities. Although, that's not foolproof either, since often strategies work much better for certain stocks.
For example, here is your exact strategy but just trading the S&P instead of AAPL. I just changed the sid from 24 to 8554. Another advantage of trading the S&P is that you can easily compare your strategy to a buy and hold strategy with the same stock, since as I said the benchmark is the S&P.
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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.