Home > Backtesting, R, Trading Strategies > Introduction to Backtesting library in the Systematic Investor Toolbox

## Introduction to Backtesting library in the Systematic Investor Toolbox

I wrote a simple Backtesting library to evaluate and analyze Trading Strategies. I will use this library to present the performance of trading strategies that I will study in the next series of posts.

It is very easy to write a simple Backtesting routine in R, for example:

```bt.simple <- function(data, signal)
{
# lag singal
signal = Lag(signal, 1)

# back fill
signal = na.locf(signal, na.rm = FALSE)
signal[is.na(signal)] = 0

# calculate Close-to-Close returns
ret = ROC(Cl(data), type='discrete')
ret[1] = 0

# compute stats
bt = list()
bt\$ret = ret * signal
bt\$equity = cumprod(1 + bt\$ret)
return(bt)
}

# Test for bt.simple functions

# load historical prices from Yahoo Finance
data = getSymbols('SPY', src = 'yahoo', from = '1980-01-01', auto.assign = F)

signal = rep(1, nrow(data))

# MA Cross
sma = SMA(Cl(data),200)
signal = ifelse(Cl(data) > sma, 1, 0)
sma.cross = bt.simple(data, signal)

# Create a chart showing the strategies perfromance in 2000:2009
dates = '2000::2009'
sma.cross.equity = sma.cross\$equity[dates] / as.double(sma.cross\$equity[dates][1])

theme ='white', yrange = range(buy.hold.equity, sma.cross.equity) )
```

The code I implemented in the Systematic Investor Toolbox is a bit longer, but follows the same logic. It provides extra functionality: ability to handle multiple securities, weights or shares backtesting, and customized reporting. Following is a sample code to implement the above strategies using the backtesting library in the Systematic Investor Toolbox:

```# Load Systematic Investor Toolbox (SIT)
setInternet2(TRUE)
con = gzcon(url('https://github.com/systematicinvestor/SIT/raw/master/sit.gz', 'rb'))
source(con)
close(con)

#*****************************************************************
#******************************************************************
tickers = spl('SPY')

data <- new.env()
getSymbols(tickers, src = 'yahoo', from = '1970-01-01', env = data, auto.assign = T)
bt.prep(data, align='keep.all', dates='1970::2011')

#*****************************************************************
# Code Strategies
#******************************************************************
prices = data\$prices

data\$weight[] = 1

# MA Cross
sma = bt.apply(data, function(x) { SMA(Cl(x), 200) } )
data\$weight[] = NA
data\$weight[] = iif(prices >= sma, 1, 0)

#*****************************************************************
# Create Report
#******************************************************************
```

The bt.prep function merges and aligns all symbols in the data environment. The bt.apply function applies user given function to each symbol in the data environment. The bt.run computes the equity curve of strategy specified by data\$weight matrix. The data\$weight matrix holds weights (signals) to open/close positions. The plotbt.custom.report function creates the customized report, which can be fined tuned by the user. Here is a sample output:

```> buy.hold = bt.run(data)
Performance summary :
CAGR    Best    Worst
7.2     14.5    -9.9

Performance summary :
CAGR    Best    Worst
6.3     5.8     -7.2
```

The visual performance summary:

The statistical performance summary:

To view the complete source code for this example, please have a look at the bt.test() function in bt.r at github.

1. November 25, 2011 at 8:50 pm

very nicely done. Like the report best of all. Why did you choose to limit the drawdown and ROC to models[1]? Do you mind if I use in a post to demonstrate how to change the weights, or also to potentially tie in with ttrTests?

2. November 25, 2011 at 10:06 pm

I’m writing a series of posts that will explain functionality and present examples of the Backtesting library.

I decided to include only the first model ( models[1] ) in the “12 Month Rolling” and “Drawdown” plots to limit the clutter. You can create your own version of plotbt.custom.report function to customize reporting. For example, plotbt.timelyportfolio.report function.