Dozens Backtest instructions
Select to screen to pick from. As with other testers, all stocks
are held for the holding period, but there is also a trading
period shorter than the holding period, which specifies how often new
stocks are selected. The portfolio is split into enough partitions so
stocks can be selected every trade date and held through other trade
dates, until the holding period for those stocks is completed.
There are two ways to select the stocks to hold. First, you can simply
specify the ranks in the screen. Or you can select the
top-ranked stock(s) not already held in a different part of
the portfolio. If all available selections are already held, the
highest-ranking stock will be re-selected.
For a typical "dozens" strategy, the top one stock not held is selected
every month, and held for one year. For a "dual semi" strategy, selected
ranks from the screen are selected every quarter and held for 6
If the trading simulator is being used, the rebalancing of the
Dozens portfolio may be specified. This is independent of any rebalancing
done within the separate start months. Rebalancing between the different
parts of Dozens is more complicated than regular screen rebalancing,
as it the entire portfolio can't be rebalanced at the same time.
The tester offers three different methods of rebalancing. The first and
simplest is to never rebalance.
The second method is to keep a virtual margin account apart from
the portfolio. This is the default if run without the trading simulator.
Every cycle of the tester, money is moved to or from this account to keep
the current partition of the portfolio in proportion with the total
(including the virtual margin account itself). This virtual accounting
doesn't change the actual balance of the screen, but the stocks are all
rebalanced to have the proportion as if the money were taken out.
The third rebalancing method is like the second, except a virtual
cash account is used instead of a margin account. The only
difference is the balance of this account can never go below zero.
A variation of the cash method is to show the cash balance along
with the rest of the screen, and account for it in the CAGR. This will
make for slightly reduced, but more realistic, returns.