From the December/January 2013 issue of Futures Magazine • Subscribe!

Software Review: Portfolio Maestro

Portfolio Maestro TradeStation

Website: www.tradestation.com/trading-technology/tradestation-platform/analyze/portfolio-maestro

System Requirements: Operating System: Windows Vista, Windows 7 or Windows 8 (32-bit or 64-bit)
Processor: Minimum — 1.5 GHz single-core; Recommended — 3 GHz dual-core or better
RAM: 2 GB minimum, 4 GB recommended
Hard Drive: 300 MB free space
Internet Connection: Broadband with 6Mbps or better recommended

Rating: 4 out of 4

The biggest factor in navigating the opportunities in today's market is that the individual has an overall trading approach to match his own personality.  But, the dilemma that you face is backtesting and then optimizing the key factors of your trading style, trade management and risk control in an effective manner that maximizes opportunities with respect to risk, while matching your own temperament.  Even if you have a working framework, it does little good without a way of measuring its effectiveness in the real-world. Like two sides of a coin, reliable trading system and risk management are essential components of successful trading, and one cannot be done without the other.

Worse, for those who hope to diversify their approach with multiple trading systems with the goal of smoothing out their equity curves against the back-drop of a volatile market, there is, unfortunately, very little light down that path. Without a way to get hard data on how the systems work with each other or determine the optimal money management rules, the results are hidden from view and are hit-and-miss at best.

To accomplish that, Tradestation introduced Portfolio Maestro.

Recognizing that the small individual traders needed the same type of tools that the large billion-dollar institutional traders had at their disposal, Portfolio Maestro's goal is to help you cut your learning curve on achieving your performance goals by allowing you to gather the quick, hard facts on how to combine trading systems with different money management rules to maximize their returns while controlling downside risk.

With this new feature, you are able to get access to data on how much of your portfolio to allocate to each trading method that you intend to implement in the pursuit of your trading objectives with respect to your own temperament.

For example, if you have both a trend following system and a breakout trading system, you can combine the two approaches within a sample portfolio size. Each trading system is a "Strategy" within Portfolio Maestro's framework that can be combined for a "Strategy Group," then placed under the umbrella of a "Portfolio." 

Once you have that set up, you then can customize the Position Sizing to either a fixed amount or a percent model, add money management rules and profit taking rules, and backtest the results of the combination of trade systems and custom risk model. This, in effect, goes beyond the standard backtesting that has been commonplace and gives you the ability to go beyond the constraints of system-only backtesting to help you gain a comprehensive perspective on what works, or not.

To test the program’s ability, I decided to run a test based on the markets current sideway’s price action.  Because the market had been without a confirmed trend lately, I chose to test two of PM’s trade strategies on file, the Bollinger Band Long Entry and Bollinger Band Short Entry trade systems, on the stocks that make up the Dow Jones Composite Index.

In addition, I would use one of PM’s stop loss systems, the ATR Targets & Stop LX and ATR Targets & Stop SX, to round out stop and profit targets.

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