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Good comment, Jerome. I, too, have found that expectancy calculations are incorrect when one uses compounding in his backtests. Fixing the position size will indeed enable you to calculate expectancy properly. Having done that, THEN you may use position size algorithsms to evaluate money management schemes. Good idea. However, that still doesn't solve the fundamental problem of unrealistic backtest results when you base position sizing on current equity. Thanks for the feedback.
Al Venosaavcinci@xxxxxxxxxxx
>From: Jerome ULRICH
>Reply-To: amibroker@xxxxxxxxxxxxxxx
>To:
>Subject: RE: [amibroker] Re: NDX / QQQ-Can itbe traded? !!!!
>Date: Wed, 5 Feb 2003 15:53:37 +0100
>
>Hello Fred,
>
>Backtesting system on a constant dollar trades basis enables you to
>calculate the expectency of your system. Then, you can apply your position
>sizing algorism, which should include at least a minimum size under which
>trading should be stopped (that applies especially to professionnal traders
>that have fix costs to take into account), and a maximum size above which
>the commission/slippage you included in your test non longer applies.
>
>Best regards, Jerome ULRICH
> -----Message d'origine-----
> De : Fred [mailto:fctonetti@xxxxxxxxx]
> Envoye : mercredi 5 fevrier 2003 15:13
> A : amibroker@xxxxxxxxxxxxxxx
> Objet : [amibroker] Re: NDX / QQQ-Can itbe traded? !!!!
>
>
> Yuki,
>
> I'm not arguing your statement in terms of how one might trade in the
> real world, but you are not going to design & optimize a trading
> system based on constant dollar trades are you ? especially if that
> sysem is designed to trade a broad index like NDX as represented by
> QQQ's or for that matter the hundred stocks it represents.
>
> --- In amibroker@xxxxxxxxxxxxxxx, Yuki Taga wrote:
> > Hi Fred,
> >
> > Wednesday, February 5, 2003, 10:45:49 PM, you wrote:
> >
> > Ffyc> Maybe when I get to $50mm I'd agree with you, but to limit
> > Ffyc> position sizes produces unrealistic results
> >
> > Sorry, but you are quite wrong. I thought you were a trader, too,
> > but now I'm wondering. It is unrealistic, quite unrealistic, not to
> > limit position sizes to positions that can slip in and out of a
> > market without distorting it, or actually becoming the market.
> >
> > Trading anything even close to that size, or allowing it to be
> > considered as a test, in most stocks, is producing results that
> > cannot be obtained in real trades, therefore the results are absurd.
> >
> > I would guess you would have to scale down drastically in many
> issues
> > that are less liquid than others. You can do it or not as you see
> > fit, but don't expect much respect for the numbers you are posting
> if
> > you don't. They are absurd.
> >
> > Best,
> >
> > Yuki
> >
> > mailto:yukitaga@xxxx
>
>
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