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« Stock Trading System Simulations: Out of the Starting Block | Main | More Industry Group Tests »
Monday
Dec082008

Ranking System Magic

StockMarketStudent

Sphere: Related Content                                        Stumble It!

Portfolio123 ranking system magic image
Today I am going to use some Portfolio123 ranking system magic and turn a 300% backtest into a 5000%+ backtest.  
                                                                                  

Last post I ended up with a screener backtest of short term industry strength defined by


Fmedian("RSI(7)",#Industry)>60. 

The results were as shown below holding all stocks meeting the screen criteria with weekly rebalance:

Optimized results of relative strength indicator trading system

After playing around with different ranking systems I ended up settling on one called "Fourth Generation with Unfollowed Smallcaps".  The ranking system is shown below:

Details of stock ranking system

For those people that have not been reading past posts, My universe is defined as follows:

Stock universe definition for current stock screen

The ranking system consists of fundamental and technical formulae combined with user-assigned weightings.  The system applies a ranking from 0 to 100 for each stock in the universe with 100 being the best stock choice and  0 being the worst.  Using the screen backtest I can now select how many stocks I want to hold based on the ranking system.  Below is a consolidation of the backtest results for different numbers of stocks plotted in EXCEL.

Summary of stock screen backtest using various number of stocks

This is the magic of Portfolio123 ranking systems.  300% return was turned into several thousand percent returns, not including commissions or slippage, but does include a full dose of 20-20 hindsight.  So you can't expect similar results going forward.  But it does give a nice positive bias to one's trading.  This screen may be useful for short term traders wanting to identify a small number of stocks for further analysis on a weekly basis.

The following can be found on Portfolio123:

Screen:  http://www.portfolio123.com/screen_summary.jsp?mt=1&screenid=20956

Stock Universe:  http://www.portfolio123.com/screen_summary.jsp?mt=7&screenid=20173

Ranking System:  http://www.portfolio123.com/app/ranking-system/59261

Unfortunately this doesn't help me on my quest for a long term trading system... but it was a fun exercise anyways.

Now back to the grind.

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