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Buying more securities than I have cash with macd sample code

Hi,

My name is Brenda, I am trying to edit the macd sample code so that I can visually see what it is doing. I would like to create a simple momentum strategy trading multiple stocks. With the help I created a signal function that should output 1 (buy signal) or 0(sell signal) and an if statement to sell all holdings for a stock with a signal of 0 and buy as many holdings as possible if signal is a 1. What I am finding is that no matter how much cash I have, I am purchasing stock. So that if I have $1,000,000 cash and have two buy signals I will buy $1,000,000 worth of cash of each security. What am I doing wrong?

Clone Algorithm
7
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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: 55b180e27fa3020c71d58f23
There was a runtime error.
1 response

Brenda the reason you are seeing that leverage is because in your code you ask it to buy 100% of you portfolio value for each stock.

 Iterate over the list of stocks  
    for stock in context.stocks:  
        current_position = context.portfolio.positions[stock].amount  
        # Close position for the stock when the MACD signal is negative and we own shares.  
        if signal[stock] < 0.1 and current_position > 0:  
            order_target(stock, 0)  
        # Enter the position for the stock when the MACD signal is positive and  
        # our portfolio shares are 0.  
        elif signal[stock] > 0.05 and current_position == 0:  
            order_target_percent(stock, 1 - current_position)  

So you have 3 securities in context.stocks and you iterate through each of them, your buy logic is what is messing you up. To enter a position you require that the signal is greater than 0.05 and you currently have 0 positions, are as your code says current_position == 0. Well when you place the order you choose a portfolio weighting of 1 - current_position well that statement will always evaluate to 1, since by definition the only way to get to the order statement is by having a current position of 0. Consequently you will always place an order for 100% of your portfolio value for each stock.

I've attached a backtest where I changed it to just hold an equal weighting of each security, log the leverage, and use schedule_function which is a more robust way to trade than with custom date logic as you have it now.

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: 55b24b418f2b3b0c6e8c326f
There was a runtime error.
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