What causes starting loss in portfolio simulation mode?
Author: kbellare
Creation Date: 7/3/2013 1:51 PM
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kbellare

#1
I'm backtesting futures in portfolio simulation mode and tried several timeframes and position sizers. (I tried 1 share/contract per position, max $/trade and others).

Even though I have strong overall net profits and Profit Factor (over 1.75) in Raw Profits mode and in Portfolio Sim mode, I get a strange loss in the first few months of simulation (see equity curve attached) - i tried with different start dates but the equity curve still shows the starting loss. Seems like a bug.

As a result, i can't increase my position size beyond 1 contract/position, because it wipes out my cash in the first few months - the portfolio doesn't survive past first few months.

1) How do i address this bug (is this a settings issue)?
2) If i can't fix it, can i get around it by have a small position size initially (to survive the first few months) but it grows as my total equity grows in latter months? As you can see in the equity curve, by setting it to 1 contract/position through multiple years, I'm 95% cash in latter years, and not able to do meaningful position sizing

thanks
Kiran



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kbellare

#2
Here's the equity curve image .. shows dip in first few months, and after surviving that it stays in mostly cash (because i've limited position size to 1 share/position to survive the first few months).
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Eugene

#3
Let's see what do we have here? A trading strategy (with unknown rules) starts out with a loss on an (again unknown) highly leveraged futures contract (with unknown Symbol Information Manager settings). Considering this, it'd take serious telepathic skills to track the bug in the strategy code from here! Unfortunately, we don't possess them. Since solving riddles with the help of crystall ball is not our strong point, you could help us by providing something to start with:

* Does the issue happen on the particular strategy? Or can you reliably reproduce it after restarting WLP and PC on a canned Strategy like "Moving Average Crossover"?
* Please include the Symbol Info Mgr settings, the data, the symbol(s), Strategy code (enough to have as-small-as-possible script that demonstrates the anomaly), and the data loading settings used.