Run the tester over the specified range of years. Available data
runs from 2003 through 2020 for most screens. You may
start at any month of the year, but other than January can only run
Stocks are picked from the screens every holding period (between
1 and 120 months) and held for that period.
Instead of selecting from the available screens, you may choose to
enter codes from any of the backtesters to
create hybrid tests. Simply copy the link listed at the top of a run and
paste into the form. Also see the backtester code
You may give your backtest a name for convenience. If you use
this backtest code in other testers, its name will be shown instead of
a full description.
Start with an initial investment. You may also add more
money periodically. You can also subtract from the portfolio by adding
a negative amount.
Instead of adding or subtracting a fixed amount, you can elect to keep
the portfolio at a fixed allocation. This is useful for testing
costs without considering the effects of compounded growth, to see what
your money might do this year.
Normally, the stocks held in a screen are rebalanced on every
trade. You can also specify to never rebalance, which may allow one
stock to dominate a screen as it grows, or rebalance at a fixed interval
(which must be a multiple of the holding period).
You can pay a fixed commission (which is applied to every buy
and sell) as well as a percentage spread (half applied on buy,
half on sell).
Capital-gains taxes can be applied, both short-term and
long-term. Taxes may be taken out on every trade, quarterly, or
Screen rankings come out on Friday, and backtests are typically done
with the closing prices on the next Monday, one day after the
rankings. This lag between ranking and trading can be varied from
zero days (trade on Friday) and upward.
Options Simulator instructions
Select the screen to choose the underlying stocks from, and the
ranks on that screen. Enter a volatility to use in the
Black-Scholes equation. Split the portfolio up into different options
strategies, specifying for each one the percentage to allocate,
and the option strategy to use (including stocks and cash).
For option strategies, also enter the percentage OTM to purchase
the option at, and the number of months out to purchase it.
The Covered Call strategy includes both the long stock and
the short call.
Warning: Options are not to be taken
lightly. Be aware that this only simulates option returns, and returns
can vary greatly, even if the screens were guaranteed to act in the
future as they have in the past (which they're not). Options should never
make up very much of your portfolio (a good rule is 10%) and you need to
have enough money to cover the relatively high-price options
The chosen volatility makes a big difference in option returns
and should be chosen carefully, based on experience with the underlying
screen. The default 55% is (I believe) good for PEG stocks, but the
number should be raised, perhaps to 75% or so for RS stocks.
You should use the trading simulator for options, as their
trading costs are significantly greater than for stocks. In particular,
a spread of 5% is typical for options. The simulator's spread
input is for the entire position for the period, so in the typical
"90% cash / 10% call" setup, a 5% option spread would amount to a spread
of .5% for the entire position. Adjust up if a greater percentage is
allocated to options, or if a stock/option combination is used.
Recommended study for options: Options as a Strategic Investment
by Lawrence McMillan is an excellent reference for any option strategy
(much more than this simulator can do). For purchasing call options using
the MI screens, Sparfarkle's "6/3" strategy, read through the demos
posted to the TMF MI board (here's
post with an index, but start at the beginning). Again: don't
actually invest in options until you're sure you know what you're