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.
After deciding on the trading systems and trade management components I was going to use for the test, I selected the Strategy Setting buttons to check the current inputs for each respective method. With Strategy Setting, you can change the inputs, properties, and money management rules for each system but on the money management section you can pick a number of position sizing frameworks – volatility, percentage of total equity, set risk loss, etc. – to guide the size and scale of your trades with each having a different impact on your results. I selected 2% of my total equity risked on each trade of the Bollinger Band LE and SE’s signals.
Now, up to this point, I didn’t stumble too badly while putting all this together because Tradestation provides an enormous amount of support and hand-holding while you learn how to integrate the various tools during this phase. Everything that I personally learned through this trial was learned through the vast video tutorial library that they offered combined with a very user-friendly PM interface.
After the strategies and management rules had been selected and the inputs for each had been decided upon, I hit the Add Symbols, click the Tradestation Symbols List, select the Dow Jones Composite and the stocks load up automatically into the Portfolio I have created.
While in the same section, I hit the Interval Settings button to select the timeframe for the test and chose “Daily.”
I then went back and named my Portfolio and added the strategies above into the Portfolio as a Strategy Group. You can keep adding strategies or Strategy Groups to your Portfolio if you choose, but I did not during this initial run. However, by doing so, you can test a variety of strategy combinations and Strategy Groups in a Portfolio to test performance under a variety of different scenarios.
Once this phase is completed, you have the option of selecting the Portfolio Settings button and selecting a Constraint for the test. A Constraint is an overriding rule for the entire group of strategies that that make up your portfolio that would abort any trade signal or position that you have if that Constraint is violated. That could be anything from having no more than 30 positions at a time, a 20% overall drawdown, selling positions that have been open a certain amount of time or anything at all that you want to test.
For my test, I selected a maximum position of 30.
Finally, I was ready for to run my backtest and clicked the Portfolio Backtest button at the upper right-hand portion of the screen. A window will appear that will ask you to set the time frame, your portfolio size and the type of backtest you want – Standard, Optimization and Walk Forward.
To keep it simple, I selected a test over the last year with a $100,000 portfolio and a Standard backtest, and then hit the Analysis button to begin the backtest.
A Global Report pulled up, giving me my test results based on my inputs.
So far, the initial tests look promising with a 23.53% gain, but PM allows me to drill down and get a blow-by-blow account of each trade down to each symbol if I choose. Some stocks were obviously high performers with others offering a mixed bag of results. Now, I am thinking of how to filter out the low performing stocks with current settings or how to optimize the right position size strategy to compensate.
But, that is how the elegant power and flexibility of Portfolio Maestro quickly helps you to determine what works, and what doesn't, at the touch of a button. In addition, you receive a tremendous degree of support and education by an organization that continues to raise the bar in offering tools and support to help you succeed.
