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Rotation models: confusion between periodicities

The period settings are confusing for the Rotation models. In the Compose panel, one selects the Rebalance Frequency, and in the Settings panel, one selects the Data Scale periodicity. This would seem to mean we set Rebalancing dates in the Compose panel and the scale of graphing in the Settings panel. If the same value (say Monthly) is selected for both of these, everything seems to make sense, like the Positions backtest panel shows that all the entries were near the first of each month, etc.

But if we change Settings (Data Scale) to Weekly, leaving Compose (Rebalance Frequency) at Monthly, the new backtest is different completely, and the Positions show that purchases (rebalances) were still monthly (although after the first week, not at the month's end). Change Data Scale to daily (shouldn't this just change the graph?), and now there seems to be rebalancing monthly, but a day or so into the new month.

However, the returns for the three choices are totally different, as are the number of Positions taken. In the model I was testing (with Rebalancing set to Monthly for all), there were 27 positions (+5 NSF) when Data Scale is set to Monthly, 72 (+19 NSF) positions with Data Scale set to Weekly, and 405 (+7 NSF) positions when set to Daily.

What's going on? Oh wait, I guess maybe that "Data Scale" sets not only the graphics for output (so that one can better visualize portfolio fluctuations between rebalancings), but also the input periodicities for the indicator chosen in Compose. I'm going to test that idea: using SMA(Close,24) as an indicator, we can see that Monthly for Data Scale gives us a 2 year lag, Weekly gives us about 6 months, and Daily barely lags a month. So, my guess was right, I believe.

I think that the periodicity of the indicator should be selectable in the Compose Model section, and it should be separate from the Rebalancing Frequency (call it Indicator Period, and default it to Daily). The Data Scale parameter in the Settings should just be for the Graphing. All of these suggestions apply only to the Rotation models, I think. I haven't run into this issue in other models yet, or haven't noticed them.

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The results are different because the indicators used as a weight is being calculated from different source data. The data scale in Settings determines the input bar data that is fed into the Rotation Model. Assume your weight indicator is RSI(14). If you select daily scale in Settings, the RSI will be calculated based on 14 days of data. Change it to weekly and it is 14 weeks, monthly, 14 months. Each of these is a valid choice for a rebalance period that is monthly, you'll just wind up with different results. The only combination that wouldn't make sense if selecting a Rebalance Frequency (such as daily) that is more granular than the settings Data Scale (such as monthly).

It may take some getting used to, but keeping the Settings tab consistent among the various model types has some advantage over putting that Data Scale control into the Compose tab for Rotation models.

The results are different because the indicators used as a weight is being calculated from different source data. The data scale in Settings determines the input bar data that is fed into the Rotation Model. Assume your weight indicator is RSI(14). If you select daily scale in Settings, the RSI will be calculated based on 14 days of data. Change it to weekly and it is 14 weeks, monthly, 14 months. Each of these is a valid choice for a rebalance period that is monthly, you'll just wind up with different results. The only combination that wouldn't make sense if selecting a Rebalance Frequency (such as daily) that is more granular than the settings Data Scale (such as monthly). It may take some getting used to, but keeping the Settings tab consistent among the various model types has some advantage over putting that Data Scale control into the Compose tab for Rotation models.

Agree, I've got it figured out now, but I still think it would be convenient to be able to set the backtest graph settings to daily (or any period) while controlling the periodicity for the indicators separately. I can manage it as it is (by changing my RSI settings, for example, from 14 days to 2 weeks) but it's less convenient and easier to make mistakes with. I'd just as soon always use days for my indicator periodicities, for example, but that may just be me.

Agree, I've got it figured out now, but I still think it would be convenient to be able to set the backtest graph settings to daily (or any period) while controlling the periodicity for the indicators separately. I can manage it as it is (by changing my RSI settings, for example, from 14 days to 2 weeks) but it's less convenient and easier to make mistakes with. I'd just as soon always use days for my indicator periodicities, for example, but that may just be me.
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