Dates and Locations

5 & 6 March 2012

London, UK

Apex City of London Hotel >>

Please visit our Training Calendar to see dates and locations for all of our courses or download the latest training brochure here (PDF).

Course Outline: Backtesting and Optimization Workshop

Backtesting and Optimization Workshop is a two-day course designed for traders and investment managers of all asset classes and time scales who are looking to test a trading strategy. The course will provide delegates with a fundamental and practical understanding of issues in backtesting, optimization, and risk control, and delegates will use relevant software (MATLAB) throughout the workshop. No prior knowledge of MATLAB is required. (Note: Students will be able to apply the principles learnt during the workshop, regardless of which software they choose to use thereafter).

Overview
+ What is backtesting and how does it differ from "simulations"?
+ What can we do to increase the predictive power of our backtest results?
+ Incorporating optimization and money/risk management schemes into your backtest
+ How to identify good/bad strategies even before a backtest

Choosing a backtest platform
+ Criteria for choosing a suitable backtest platform
+ Discussion of pros and cons of each platform
+ Special considerations for backtesting high frequency strategies
+ Why do we choose MATLAB?

Choosing a historical database
+ Criteria for choosing a good historical database
+ Discussion of pros and cons of each database

The Essentials of MATLAB
+ Quick survey of syntax
+ Building some useful utilities for trading and plotting simple graphs
+ Using toolboxes

Exercise: backtesting various types of strategies
+ Single ETF/stock/currency
+ Futures: Handling rollovers and backtesting seasonal strategies
+ Portfolio of stocks

Performance measurement
+ Returns and excess returns
+ Drawdown calculation
+ The importance of Sharpe ratio
+ Subtleties in Sharpe ratio calculation

Ways in which your backtest may not reflect reality
+ Look-ahead bias
+ Data-snooping bias and ways to avoid it
+ Survivorship bias
+ Impact of noisy data on different types of strategies
+ Impact of historical or current short-sale constraint
+ Impact of transaction costs
+ Volume constraint
+ Regime change
+ The importance of paper trading

Optimization of parameters
+ Using MATLAB to optimize
+ Using Alphacet Discovery to optimize (Demo)
+ Interpolating the optimal parameters
+ Pitfalls of parameter optimization
+ What is "portfolio optimization" and do you need it?

Money and risk management
+ Optimal capital allocation and leverage via "correlation analysis" and the Kelly formula for continuous finance