Hi, I ran a backtest on 29 Jan 2020. On the results page, under Simulated Orders, I see instructions to buy and to sell. I do not own any counters in this portfolio yet. So how do I make sense of the sell order?
Thanks for the reply. I think the confusion I have lies in the change that took place in the "Simulated Orders" section.
The original "Simulated Orders" I saw on 26 Jan is the screenshot in my first post (attached below) which lists 5 Buy and 3 Sell orders. In that screenshot, BWX was sold on 26 Jan (2021-01-26). Note that BWX was not listed in the portfolio hence my earlier question of what I should do if I'm asked to sell a counter I am not holding.
I looked at the "Simulated Orders" section again on 1 Feb. This time, the list of "Simulated Orders" have changed to 7 Buy and 9 Sell orders dated 2 Jan (2021-01-02). See the screenshot attached.
1. It will be done on the first business day of the month.
2. In your orders section. It shows BWXT was sold on 2nd of Jan.
3. Today means orders that are new and was just created on today's date itself. In the orders section there is a date column which shows the date the order was created. In your case the sell order for BWXT was 2nd of Jan which was almost a month ago.
I'm not sure I understand. Could you clarify the points below?
1. Yes, I had set rebalancing to be done on a monthly basis. I created the portfolio on 26 Jan 21. Will the rebalancing be done on 26 Feb then, or would it be done on a particular date in Feb?
2. You mentioned "BWXT was sold on 2nd of January". Where in the Results page can I see that info? Or was that a piece of info you pulled from the backend?
3. What does "today" mean in "You only need to include both the portfolio and the orders if the orders happen to come in today"? Does today refer to the date of portolio inception (i.e. date of implementation?)
4. Also, when I looked at the results page today (1 Feb 21), the list of Simulated Orders have changed and have been dated 2 Jan 2021 (see screenshot attached). Why did this happen?
We had a look at your backtest. In your case, the rebalancing is done on a monthly basis. In the orders, the date shows that BWXT was sold on 2nd of Janurary so in the existing portfolio, BWXT was not there because it was sold already. In this case, you do not need to include both the portfolio with the orders as the orders were already completed on 2nd of January.
You only need to include both the portfolio and the orders if the orders happen to come in today as it has not been reflected in the model's portfolio yet. Hope this makes sense. Do let us know if you have further questions. Thank you.
Thanks Ivan. The example is useful and easy to understand. To build on your example, if the portfolio section says to buy A x 50, B x 50, C x 50, and the orders sections says to buy A x 30 and sell B x 20, I will purchase A x 80, B x 30 and C x 50.
One more thing - under the orders section, it tells me to sell BWXT. However, BWXT is not listed in the portfolio section. What do I do with that order to sell then?
You have to include both the stocks in the portfolio section and the orders section if you're starting to implement a new strategy.
For example if your current portfolio is holding stocks A and B and the orders section says sell B and buy C. You will buy stocks A and C directly. Hope this helps.