Main Description
The Volatility Target Tool allows users a way to backtest a fund with the weighting of that fund adjusted to target a certain volatility amount instead of purely being 100% vested in that fund. For example you may decide you would like to be long a certain stock or bond fund, but would not like to be fully long that fund when the market volatility increases, this tool allows the position to be scaled down when volatility is above the threshold, thus targeting the volatility level you decide. This tool either allows you to specify cash or a specific fund as your out of market fund.


Select Data Feed
Select a data feed to use. The Universal Data Feed has been our default data feed, and provides stock, ETF, and mutual fund data for the US and non-US markets. The Professional Quality Data Feed provides high quality data for US stocks, ETFs, and mutual funds. Additionally there is an option to select historical data, which allows users to select funds with histories that go back as far as 1924.

Enter Stock or Fund and Cash Ticker into Backtester
Enter almost any stock, ETF, or mutual fund ticker into the stock and cash ticker fields. The stock ticker will be bought when its price is above its moving average is above. The cash ticker will be bought and the stock ticker sold when the stock ticker’s price falls below the specified moving average. A single stock ticker and cash ticker is allowed.

Start/End Simulation Date
The date values to start and end the simulation. If a ticker is unavailable for some of the date range entered the default behavior will be to only test the dates when all tickers are available.

Frequency of Updates
This setting allows the user to choose how often the conditions are evaluated and updates to allocation are made. For example a monthly update means once a month (at the end of the month), the back tester calculates the new weight values based on each one of the 5 algorithms and adjusts the weightings of each ticker to match the weightings reported by each of the algorithms. These weightings will be held until the end of next month when the back tester will evaluate (ask the question) again and re-weight the portfolio according to the new values for each algorithm.


Volatility Target % Input
Enter the targeted volatility percent for the test, keep in mind some funds volatility may be less than your entered number therefore the backtester will not adjust the volatility since it always remained under the targeted %.

Volatility Length Input
Specify the length of the volatility calculation in months done when calculating the volatility value.

Moving Average Filter
This setting allows the user to choose what type of moving average, and how long the moving average is that will be used to determine if the stock ticker is above or below the moving average. Selections for the moving average type are, simple moving average, exponential, weighted, wilder exponential, double exponential, and look back length. The length of the moving average can be set as well, longer values will result in a slower to react moving average but prevent crossovers from happening too frequently.

Second Moving Average Filter
You can enable the second moving average filter by checking the box ‘Use Second Moving Average’. A popup will now allow you to setup the length of the 2nd moving average, keep in mind this should be shorter than the main moving average, same moving average method is used for both moving averages. The second moving average allows you to define a moving average that the main moving average (above) has to cross over to be considered above or below, instead of just using the price of the fund entered.

For example, without a second moving average (box deselected) if the price of the stock at the end of the period is 57.00, and the moving average (main ma, shown above) is at 57.10 then the moving average tool will consider the stock below the moving average and invest in the cash fund instead.

If we are using the second moving average (box selected) the price is 57.00, the main moving average is 57.10, but the second moving average value (50 day moving average show to the right) is 57.20, then the tool will consider the stock above the moving average since we are comparing the second moving average price of 57.20 to the main moving average with value 57.10 and that value is above, so therefore we are in the stock fund.

Drawdown Limit
Selecting the checkbox for “Limit Drawdown using cash filter fund” allows the user to limit the drawdown of the strategy. If the drawdown of the strategy is more than the defined drawdown limit % (slider value), the strategy will invest in the “Cash Filter Fund” setup earlier even if some of the funds are still above the respective moving average. Once the strategy equity drawdown is less than the target the strategy will invest normally again, using the moving averages to decide which fund it invests in. This essentially puts the brakes on a strategy until its’ equity recovers.

This is only updated as often as you select the “Frequency of Updates”, so it will only check at the end of the month or week or other, if the strategy equity has a certain drawdown. Therefore it is possible that the strategy drawdown could be greater or even much greater than the defined limit.

Save Your Settings For Later
At the bottom of the settings area there is a URL, bookmark or save this URL and you will automatically be able to load and save all your settings automatically, without re-entering it every time.


The tool outputs fully interactive charts showing day to day equity (not just monthly data), day to day draw-down, transitions from stock to cash symbol, a plot of the correlation of all tickers entered, a summary of performance, % allocation per symbol, annual/monthly performance table.


Downloads that are available are a full trade spreadsheet, day by day strategy equity spreadsheet (which can be uploaded to any of our portfolio combination tools), and a list of settings you used to create the results. You may also download an HTML report with fully interactive graphs that you can save and send to others.

Example Strategies and Settings

Low Volatility Switching Strategy
This strategy rotates between the “stock fund” of SPY and the “cash fund” of IEF. The strategy targets a 12.5% 3-month volatility, and invested in bonds (IEF) when the volatility of SPY is high. is not a registered investment advisor and does not provide professional financial or investment advice. is a tool that produces trade signals and backtesting results according to the set of funds and rules provided for analysis. Any strategies shown including but not limited to the pre-built strategies are only used to highlight what is possible using these tools, they should be regarded as educational in nature only, and not investment advise.