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Computerized Investing > June 18, 2016

Stock Screening and Backtesting With SynVero

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by Kenn Pennington

SynVero is a new cloud-based on-demand tool for stock screening. Features include a stock screener, backtesting and a trade simulator. A basic subscription is $9.89 per month and the Pro version is $19.89 per month. A free 30-day trial is available. In this article, SynVero’s founder describes how the features work.

Stock Screener

Stock screening assists investors in identifying potential investment opportunities based on a set of quantitative filters. Typically, a stock screener will start with a broad listing of securities and the investor either selects predefined stock screening parameters or provides custom criteria that describes the desired security or scenario. The criteria are then applied against the available securities, and only securities that meet the set of filters are displayed.

The criteria utilized varies according to an investor’s preferences and the capabilities of the screening application itself. Investors often use stock screening to search for stocks based on desired fundamental and/or technical values.

SynVero’s stock market screener enables users to search for desired securities using detailed and customized criteria. Its filtering technology is built around the concept that screening can be broken down into smaller interrelating pieces of logic called criteria. Some criterion examples include a moving average crossing above or below another moving average or a price-earnings ratio within a range of values. These criteria are building blocks for constructing filters that range from basic to extremely robust. Each one autonomously applies its logic to the broader results, yet it can be connected to other individual criterions containing their own separate logic to contribute.

The goal of these independent, yet connected, criteria is to provide flexibility. The chained connection points are subjected to either conjunctive or disjunctive joins. Essentially, this means you can employ “and/or” logic with a high degree of specificity. Please note the “or” disjunction is only available to SynVero Pro level account clients and can only be used twice within a single filter. Criteria can also be defined as exclusionary or inclusive, which means you can determine if the criterion is something you want to find or something you want to avoid.

Each criterion is further defined according to one of four categories: general, fundamental, technical indicator or analyst recommendations. Within the general category you can specify security types, market exchanges, sectors or industries. Using a fundamental criterion, users can filter based on a number of fields originating from the company’s SEC 10-Q or 10-K filing. Using the technical indicators category, users can filter on a variety of technical values or achievements. With regards to the analyst recommendations category, users can generate criteria based on consensus analyst estimates from Zacks Investment Research.

In many instances, users can establish comparisons across categories of criteria. So a technical indicator is not restricted to being analyzed in the context of just other technical indicators. As an example, you can identify stocks where the 200-day simple moving average (SMA) is below the analysts’ mean target price.

Users can decide which filtering criteria to include in their screen using SynVero’s interactive wizard (called the Filter Designer). Figure 1 shows an example of a criterion being added. An example of how the Filter Designer visually represents the criteria, their individual logic and their interconnection to each other is displayed in Figure 2. The criteria as a whole can be saved as a filter and then executed again by simply opening it from the toolbar.

The results of the screening can be downloaded as a comma delimited (CSV) or Excel file, added to a watchlist or simply reviewed on screen within a highly configurable grid. Figure 3 gives a sample of the grid. Investors can select from over 50 different fields to display within their filtering results, which can be sorted, navigated and drilled down to view all available details (Figure 4). Finally, the results of the filters can be automatically emailed to you each day.

Backtesting

Backtesting is a form of retrodiction where a predictive model is tested for accuracy against historical data. As it applies to investing, backtesting is a method of measuring a specific investment strategy’s hypothetical performance using historical stock prices. While the goal of backtesting is to more finely tune an investment plan before executing it in the real market, it’s important to note that historical performance is not always indicative of future performance.

The primary shortcoming is that backtesting never completely emulates or substitutes real-world market transactions and the economic forces at play. Although the depth of thoroughness can vary, most backtesting software packages ultimately share a fundamental deficiency: They use past data, which is not guaranteed to be repeated in the future. That might appear as a philosophical bone to pick, but it has practical implications for those willing to place a degree of confidence into a backtest’s outcome.

Despite any theoretical or practical imperfections, backtesting can still be an immensely valuable tool to investors. It permits a glimpse into a strategy’s potential performance without suffering any monetary consequences. It systematically applies an investment strategy and can steer you toward a more precisely defined description of the opportunity you’re seeking. Backtesting software also removes emotions from the investment strategy, which is an area where it outperforms its human counterpart.

With SynVero, any stock screening criteria users define can be backtested. As an example, if a user sets up a filter to find securities where the moving average convergence divergence (MACD) crossed above its signal line, he can use the same filter in a backtest as his position entry requirements. Criteria can also be established for exiting a position, along with many other parameters such as starting capital, long versus short, and amount to spend on positions to name a few. Figure 5 shows an example of setting up a backtest. The amount of historical data available for backtesting in SynVero is dependent on your account level. Basic accounts are limited to one year and Pro accounts are limited to eight years.

After setting up a backtest’s parameters, it can be submitted to run against SynVero’s resources. With approximately 3.9 million potential entry points per year of historical data, SynVero’s cloud infrastructure scales according to demand and is optimized to quickly fulfill these backtests. However, the amount of time it takes to complete a backtest is influenced by how much historical data you’re utilizing and how narrowly your entry criteria is defined. SynVero’s basic account users can expect completion times between a few seconds and five minutes. Pro level accounts, with eight years of available market prices to test against, can expect completion times between a few seconds and 30 minutes. Completion times can be reduced when greater criteria detail is provided for position entry. Users can elect to be automatically notified via email upon completion. After finishing a backtest, SynVero provides a summary of the performance along with detailed information regarding how each trade performed within the backtest along with any reasons the trade might have been exited.

Trade Simulator

Investment games or trade simulators share some characteristics with backtesting. Trade simulators typically present historical prices in a stock chart and disguise or hide the real name of the underlying security. The person playing the game then has an opportunity to make a fictional investment and gauge their performance over a period of time.

As with backtesting, there are logical fallacies that come with trade simulators. The primary one is the use of historical data and the inability to accurately represent all the variables involved in real market transactions. The caution here for investors is that performance within a simulated trading game does not equate to actual market performance in the future.

SynVero’s trade simulator is intended as a complementary tool to both its screener and backtesting features. Using the trade simulator, you can test yourself against historical market data without risking any funds as you hone your trading or investment skills. SynVero’s basic account allows users to practice against randomly selected securities from the past year. Although the user has the ability to decline making an investment and request another randomly selected security, they do not have an ability to determine which securities are selected for the practice session. Pro level account users can practice against both random securities and securities matching a filter’s criteria from the past year. Suppose a Pro account user has a filter to find securities where the MACD line crossed above the signal line. They could use this filter to identify matches from one year ago and practice trading against these older matches (without the actual security symbol being revealed until after the practice session).

Additional Features

SynVero also provides a help guide that contains an overview of financial fields and technical indicators, along with the mathematical formulas utilized to calculate them. Charts can be configured to render as bar, line, candle or mountain with scaling methods of linear or logarithmic. Finally, the overall color theme can be adjusted between the default black to an alternative white.

Subscription Levels and Pricing

SynVero offers two different account levels. Each provides a 30-day free trial at the beginning of the subscription and can be canceled at any time. The basic account costs $9.89 per month. The Pro account is $19.89 per month and provides additional features such as the ability to design “and/or” logic with more historical data available for backtesting. More information on account comparisons can be viewed here.

Summary

SynVero is a Software as a Service (SaaS) tool that provides investors with a customizable stock market screener based on technical indicators, fundamentals and analyst recommendations. Our database covers over 15,000 securities from NASDAQ, NYSE, NYSE MKT and OTC. Pricing data uses end-of-day data. The software also includes backtesting and practice trading based on filtering results.


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