You have a masterful strategy… but does it work?
Our backtest simulates running your strategy over years. In a few minutes it will give you data and a very clear idea of how your strategy would have done in the past. We’ll show you 20 years of history, including the dot-com bubble and crash, the Great Recession and the PIIGS Euro-crisis of 2011. We include delisted stocks in all of our simulations to prevent survivorship bias.
Discover
- What your strategy did over the span of time
- How many stocks were delisted
- How focused on one industry your strategy is
- How bad its worst drawdown was
- What and when your strategy bought
- What its Sharpe ratio was
- How many stocks it held at any point in time
Customize
- Stop losses and gains
- Maximum and minimum holding periods
- Position weighting, including long/short
- What your strategy bought, and when
- Number of stocks to buy
- What variables to plot
- Indexes to compare against
Configurable trading costs
In real life, trading costs vary per stock and time, and can critically depend upon the details of your brokerage.
We model trading costs as slippage, which can be configured with a formula that can refer to any attribute of the security being traded. Set Market Cap cutoffs (as the Kini Trading Costs do), use average trading volume, or a composite based on your own specific needs.
Long/Short Portfolios
The backtest tilt in this case shows an alternative view of a long/short portfolio. The large number of points clustered around the y-axis indicates that the strategy made a bold move, up or down, when the market went nowhere.
The dots around the x-axis tell a tale of drifting while the market was strongly in motion. As with many long/short strategies, market correlation is almost absent: beta is 0.007, which allows this strategy to have 2.25% alpha even while only going up half as much as the market.
Max holdings
Think your portfolio is too big? Limit the number of stocks held. Here, max holdings has been set to 5, with the ranking factor being Income Statement Score – Balance Sheet Score.
Stop-losses And stop profits
Stop-losses may reduce volatility, but they also impact performance. In the chart above, up until 2010, the green backtest line used a 20% stop-loss.
From 2010 onwards, the strategy is much stricter: a 10% trailing stop-loss.
The green backtest line follows the orange baseline until 2010, whereupon it just seems to run out of steam. Perhaps something is “stopping” it?
Constrained Holding Periods
Investors are human. They won’t generally jump out of a position they just jumped into, and they may also refuse to buy something they previously sold that year.
Do these quirks make a difference? Find out! The grid above shows a list of trades where the investor trades quarterly, is unable to sell for at least one year, is unwilling to hold for more than three years, and never buys a stock that has been sold. As might be expected, this underperforms vs. the base strategy, which has outperformed since 2010.
Rebalance anytime
This piece of seasonal insanity takes a perfectly ordinary composite of a Beneish/Piotroski/Momentum strategy and overlays it with a seasonal refusal to hold during the summer months and certain bad holidays.
The really interesting thing here is that the screen rebalances every time we go from a vacation state to a non-vacation state. This happens several times a year, at irregular intervals. The red reality line is merely the screen itself outperforming the market.