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Zero "0" share trades impacting backtest results????

When building trading models, before taking the model into production because of substantial back testing confirmed by several months of forward testing, the final pre-production validation is done by converting the algorithm to native python, so the two are identical, and then running a closed backtest using something other than Zipline. Plus, it's a bit easier to do diagnostics outside of Zipline.

Recently, a model ready for production went through this final check and I noticed a handful of orders for zero shares were being generated. I thought this was due to something in the native Py version of the code, so I suppressed 0 share orders. Just to be safe, I added the same code to the algo on Quantopian and ran another test. I was shocked to see performance adversely affected. Not significantly over a short time period of 3 months, but enough so that over time, it affects compounded RoR.

I record gross and net exposure because this is a market/dollar neutral strategy designed to handle substantial capacity, with or without leverage (12-20x) with vola still within bounds. When I suppressed 0 share trades with the following code, it caused gross exposure to oscillate in large ranges:

def registerOrder(context, longPos, sym, shares):  
    if sym.symbol in context.orderSet:  
        # log.info('Duplicate order for %s - ignored' % sym.symbol)  
        return False  
    elif shares == 0 and prevent_zero_trades:  
        # log.info('Zero shares trade for %s - ignored' % sym.symbol)  
        return False  
    else:  
        context.orderSet.add(sym.symbol)  
        context.orderList.append(OrderEntry(longPos, sym, shares))  
        return True

def executeOrders(context):  
    for orderObj in context.orderList:  
        order(orderObj.symbol, orderObj.shares)

    context.orderList = []

By changing the 2nd 'return' value to True, it suppresses. False lets the trade go.

Any idea what I'm doing wrong? Are zero trades a bug in Quantopian? What is their purpose?

1 response

Hi Pej, I haven't been able to produce a backtest that exhibits this behaviour. Any chance you can share a backtest that I can dig into (either here or via a private support ticket)?

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