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Stockworm simulations allow you to test the performance of an investment strategy in past markets. You provide Stockworm with a description of your investment strategy and Stockworm will use our historical database to backtest how a portfolio managed with your strategy would have performed over time. Upon completion, you will be presented with a plot of simulated performance along with a number of statistical measures and details of all buys and sells:
We‘ll talk more about investment strategies in a later post … for now, it‘s enough to understand that strategies are an extension of screeners. Screeners tell you what to buy; strategies tell you what to buy and sell and WHEN to buy and sell.
As a general methodology, you will:
- describe your investing philosophy using an autoinvestor strategy
- run a simulation of a portfolio using your desired starting cash balance and a date range of interest
- review simulation results noting the overall performance of the simulation in addition to the relevant statistics
- refine your strategy as desired and re-run the simulation to see how your changes effect performance
So … let‘s be more specific about how you would run a simulation. The first step is to describe your investment philosophy starting with either a new strategy or one of the stockworm strategies.
Once you are satisfied with your strategy, click on the “simulate“ link on the toolbar above your strategy or the “create simulation” quick link on the left of the page. You will be presented with the simulation parameters form:
This form allows you to select the beginning and ending date for your simulation, the starting dollar balance, the commission on trades, and the trading price option. This last parameter determines whether, for example, the trades will be executed at the median price for the day (the default setting) or at another price such as a worst case buy at the daily high, sell at the daily low.
Once you have set up your simulation parameters, hit ‘submit‘. At this point, the simulation will be queued to be run in the Stockworm simulation engine. You can now go to your simulation list to see all of the simulations that you have submitted, with your most recent simulation at the top of the list.
If you click on your simulation, you will be presented with the results of your simulation (the simulation results page will prominently display the status if the simulation has not yet been completed). The manual does a good job of explaining each of the statistical measures which are shown on the simulation results page.
Now you can take some time to analyze the simulation results and decide if you are satisfied or if you would like to further refine your strategy. If you are satisfied, you can set up a Stockworm portfolio to be managed by your investment strategy. This will be discussed in a follow-on post.
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