General instructions

Run the tester over the specified range of years. Available data runs from 2003 through 2023 for most screens. You may start at any month of the year, but other than January can only run through 2022/2023.

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 guide.

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.

Trading simulation

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 annually.

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 contracts.

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 the last 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 doing.