Avoiding Excessive Backtest Purchases by Correcting Trade Timing

Summary

This discussion addresses a backtest in which purchases across two mornings totaled more than the stated initial capital. The explanation attributes the apparent overspending to the simulation’s timing convention: the backtest accesses that day’s completed candlestick data at the end of the day, while the recorded sale occurs at 3 p.m. The suggested adjustment is to change the sale price point to the opening price, aligning the assumed execution point with the strategy’s intended timing and changing when sale proceeds become available for later purchases.

The exchange illustrates how bar timing and the assumed availability of cash can affect simulated trades, even when the starting balance seems insufficient for the recorded purchases. It does not provide the strategy code, a full account of order execution or settlement rules, or a rerun showing that the adjustment resolves the discrepancy. The advice is therefore specific to the described backtest setup; the correct price point depends on when the strategy is meant to trade and how the simulator handles orders, proceeds, and intraday data. A general audit should compare these assumptions with the actual trade schedule.

Key ideas

• The reported purchases exceed initial capital because of a mismatch in backtest timing assumptions.
• The explanation says the simulation uses completed daily bars while recording a sale at 3 p.m.
• Changing the sale price point to the open is suggested to better match the intended execution timing.
• The discussion provides no rerun or detailed accounting rules, so the fix depends on the simulator and strategy schedule.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.