OmniTrader Forum - Portfolio Simulation Mode
OT21 PortSim Shares Bought/Sold v Market Liquidity

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aztrix

Posts: 116

Joined: 6/16/2004
Location: Sydney, NSW, Australia

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Subject : OT21 PortSim Shares Bought/Sold v Market Liquidity
Posted : 9/9/2021 10:49 AM
Post #48265

I've suspected this for a while but haven't done the investigation to confirm it until now.

The problem is that the PortSim buys more shares on entry and/or sells more shares on exit than are actually traded on the exchange for the stock. 😲 Seriously???

This should be classified as a bug IMHO as OT already knows OHLC & V for each share for each day's trade and shouldn't allow the PortSim to buy or sell more shares than were traded on any given day. I appreciate volume traded is volatile and exits may become tricky but realistically we're highly unlikely to trade more than a fraction of the market liquidity anyway.

Now much as I'd love to believe that I can move the market 🤑 in reality I just wake up and my coffee is cold. 😆

This might look great for marketing but our strategy testing results are clearly unrealistic and the skewed results could lead to a false sense of security about how good a strategy really is and may ultimately cost us our hard earned $$$ when reality bites.

Here is the example I investigated today and it exhibits the entry AND exit bug, FMG (Fortesque Metal Group) on the ASX


14/06/2001 Volume: 698.5 K
15/06/2001 Volume: 48.5 K

My PortSim trade below:
Entry Date_____ 14/06/2001
Symbol________ FMG
Strategy_______ XLS-19 MOC
Qty___________ 2,128,708
Entry Price_____ $0.00936
Exit Date_______ 15/06/2001
Exit Price_______ $0.00975
G/L($)_________ $830.40
G/L(%)________ 4.17%


That is more than 3 x the market volume traded but if you think that's crazy try this for size. On the exit the following day there was only 44.5 K traded, that's nearly 50 x fewer than PortSim managed to sell, in reality at that rate it would take you ±3 weeks to liquidate the position 🤮

Clearly there is room for improvement … Even if you add a liquidity filter it won't prevent this happening but it certainly makes the results slightly more realistic.

I love the PortSim but it needs to be fixed, here are a few fixes/enhancements I'd like to see to bring some reality to the PortSim results:

1. Add a setting for entry exposure to Simulation Settings/Trading Parameters to allow users to control the maximum percentage of any share's daily liquidity they're exposed to e.g. using 1% in the above case would be 6985 shares

2. Exit size <= market volume or exit over 2 or more days if there is insufficient liquidity

3. At the very least if we can't have the features above fix the bug that allows PortSim an entry/exit > liquidity

4. An alternative allocation method based on price would also be a welcome addition e.g. $0.001 - $0.99 1%, $1.00 - $4.99 5%, $5.00 - %9.99 10%, > $10 20%

This shouldn't be difficult to implement, all the information required is already there 😋 other than the new enhancement parameters 😁

Has anyone else come across this problem before?

I hope this makes sense and the rest of the community get behind this request 🙏🏻🙏🏻🙏🏻

Please find attached the related files

Cheers
Aztrix

Attached file : XLS-19 V2 MOC - % of Equity - ASX 300 Trades (FMG).xlsx (9KB - 259 downloads)
Attached file : OT21 PortSim Volume FMG 2001-06-14 Entry.JPG (51KB - 267 downloads)
Attached file : OT21 PortSim Volume FMG 2001-06-15 Exit.JPG (50KB - 256 downloads)

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Buffalo Bill

Posts: 539

Joined: 10/3/2006
Location: Stafford, VA

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Subject : RE: OT21 PortSim Shares Bought/Sold v Market Liqui
Posted : 9/10/2021 9:15 AM
Post #48266 - In reply to #48265

These are some of the many reasons I use Fixed $ for testing and have both Vol and $ filters

Even so you make very valid points

Good catch


https://www.omnitrader.com/currentclients/otforum/thread-view.asp?threadid=16460&posts=2