Negative Cash

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Negative Cash

posted Jul 24, 2014

Hi everyone, I'm a bit of a stock market noob, but a seasoned programmer, so I'm giving this tool a try. Seems pretty cool, but I'm having trouble with the basic algo taking my cash into the negative.

Early in the history, around the 26th and 27th of January (first year of the backtest result), under the Positions tab, my cash position goes into the negative.

In the real world, does this mean I'm then borrowing that cash from my broker?

The more important question being, how do I keep the algo from spending that far or at all into the negative.

Thanks!

db

2 responses

Hi David,

Welcome! The short answer to your question is your current_price is the price of the previous bar.

Here's the long answer: The backtester takes the price at the end of each bar. This means in Minute mode you get a price at 9:31, 9:32, 9:33 etc. In Daily mode, you get a price on Monday at 4PM, Tuesday at 4PM etc.

When you're in the middle of running a bar, you can't know the price at the end of the bar. This would constitute look-ahead bias. To prevent this, the backtest uses the price at the end of the previous bar. For example, if your Daily backtest is running on Tuesday, the "current price" variable takes the price from Monday at 4PM. This effect is minimized for backtests in minute mode because you are querying the price every minute, so you're exposed to smaller price fluctuations.

In the real world. if your cash balance goes negative it means you're borrowing money from the broker and paying interest on the loan. If you don't want to hold negative cash, you can restrict the amount of cash available to your algo. I attached your backtest and updated line 45 to allocate only 90% of the portfolio cash.

Cheers,
Alisa

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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.

If his algo tries to place another order before the previous one fills and then they both fill will he not be left with negative cash?

I'm having exactly that problem and can't for the life of me find an answer to this seemingly simple problem. I am trying to make an algo ready for live real money trading but it naturally trades low liquidity stocks. I need a way to calculate the actual cash available (cash - buy order total), please help!!!

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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.

About Quantopian

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.