Portfolio Design

Advanced concepts in stock investment portfolio design.  Fundamentals, technical analysis and many other related topics are discussed.

Ranking System Optimizer Tutorial

Alchemist

Alchemist

A number of Portfolio123 members have been asking for a tutorial on the stock ranking system optimizer since it became available almost one year ago. P123 staff have been silent about its use ever since. Recently I became curious about it and decided to explore the feature to see how (or if) I could make use of it.

What I discovered was that the optimizer has some limitations that make it difficult to use without proper documentation. In addition, usage also requires use of EXCEL or other spreadsheet program in a fashion that is not very intuitive. But once the limitations and interface are understood then one can make effective use of it.

Just remember that it is only a tool and is only as good as the person using it. Optimization is not a science as some would like to believe. There is no correct end-point, or time to stop. Two people attempting to optimize the same ranking system will invariable come up with two different results.

In this tutorial I will attempt to optimize a popular stock ranking system, All Stars: Piotroski. It is the ideal ranking system to start with as there are only eight ranking factors and most investors are familiar with Piotroski.

The tutorial will be broken up into several parts as there are a lot of pictures, and google is already complaining about the load time of some of my articles :)

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