Buy top X hold while in top Y
Apr 05, 2022
in Backtest, Relative Strength
We have added a Hold Filter option to the Portfolio Relative Strength and RS - Combine Portfolios backtests.
When the Hold Filter is turned on, the ETFs will be held as long as they remain ranked in the top (or bottom) Y.
i.e. If you choose a Buy Top of 2 and a Hold rank of 4, then the backtest will invest in 2 ETFs, but will only rotate out of an ETF when it drops below the top 4.
Using the Hold Filter makes a model less reactive and as a consequence it reduces trade activity. By not switching each and every time a security moves in and out of the top X, it can also result in fewer whipsaws. However, the higher the hold rank number is, the less responsive to changes the model will be, so a balance must be struck.
click image to view full size version
Note: the hold rank must be greater than the buy top / bottom number and be less than the number of securities in the chosen portfolio(s).
Follow ETFreplay on