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200,000% return - yeah, right!

I was fiddling with a momentum algorithm, and I found this totally unexpected result. Obviously, it's not a real strategy - buying Apple is one of the best things you could have done in the last decade.

But this algo does way, way better than simply buying Apple - the momentum aspects of the purchases were far more profitable than simple purchases. Anyone have any reaction? Why did this work so well?

Clone Algorithm
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# Backtest ID: 5029b93f045bc26bcd0011c0
This backtest was created using an older version of the backtester. Please re-run this backtest to see results using the latest backtester. Learn more about the recent changes.
There was a runtime error.
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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.

9 responses

I think it worked so well because the more you tweak the parameters the more you fit the curve - unless of course this system performs equally well on different stocks using the same settings. More tests will show.....

defc0n1, I cloned this algo and I'm trying it with another high momentum stock - GLD (a gold ETF). I'll post the result shortly.

Disclaimer

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.

Is there limits to how much leverage the backtester allows? The only way you would see something like this is if you are unrealistically overlevered. When I cloned this strategy and and ran it, it was borrowing $24M for a $1M capital base at the end after one year. Maybe there should be settings to limit leverage?

Hello James - You're absolutely right, one of the totally crazy things in this algorithm is no leverage limit.

We've been thinking about ways to build leverage limits into the backtester. One of the ways I've been thinking about it is to get your leverage limits from your broker, and then automatically applying them.

Until then, you can do it yourself with a few lines of code. Create an "if" statement that represents your leverage limits, and apply it on the orders. You could even program in a margin call if you wanted!

you have chosen the right asset: 200,000% return for Apple - yeah, right! ---> - 1702.9% return to SID 21916 - yeah, ....Petrobras, a Brazilian company (ADR) on the NYSE.
After all, which algorithm to choose the right SID?
How do I set the SID for most assets, including in other countries, commodities etc?

this is awesome but only work with positive movement stocks. I backtested with TWTR and got horrible results.:(

Clone Algorithm
5
Loading...
Backtest from to with initial capital
Total Returns
--
Alpha
--
Beta
--
Sharpe
--
Sortino
--
Max Drawdown
--
Benchmark Returns
--
Volatility
--
Returns 1 Month 3 Month 6 Month 12 Month
Alpha 1 Month 3 Month 6 Month 12 Month
Beta 1 Month 3 Month 6 Month 12 Month
Sharpe 1 Month 3 Month 6 Month 12 Month
Sortino 1 Month 3 Month 6 Month 12 Month
Volatility 1 Month 3 Month 6 Month 12 Month
Max Drawdown 1 Month 3 Month 6 Month 12 Month
# Backtest ID: 53bea37b834dc2072804ac88
There was a runtime error.

cool. next algorithm operates to profit from movements low: latches with low purchasing options, sales of mini-index contracts, sales of leased shares and sales of shares short.

Dan,
What is the purpose of context.port? Is this buying upto 1000 stocks?
Thanks,

This is a really old algorithm when I was just getting started with Quantopian. If I could go back in time, I'd tell myself to put in cash management and not let it borrow so much money.

The context.port was something I was fiddling with, but it's commented out. It doesn't actually do anything in the implementation. I should have just stripped it out.