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<Where the back test reports confuse me is when we start out with 100k
run it up to 1 million+ then experience a 1/2 million dd on a trade.
or 1/2 million profit on one trade while others are losing/making
money. Testing a universe of 8000 stocks for 10 years could find a few
remarkable trades that skew the end result simply because of where the
trade occurred in the run (huge win/loss in the middle when the
portfolio was fat).>
Jayson,
This is a fun thread.
By limiting each trade to $20k or some other 'fixed' amount, you don't
experience the kind of 'remarkable' trades that I think you are
talking about. Only compounded trading systems should have those kinds
of problems.
Now that does not mean that I have not experienced either real or
backtested surprise trades, both positive and negative, but in all the
years I've been backtesting, I've only found one suspicious trade that
appeared to be a chart data aberation. But when I researched multiple
sources of chart data, they all had the same data. Since this was a
very profitable trade, I culled it from the trading system results
just to be on the safe side. And I have never culled really bad losing
trades from the trading system results... I prefer it to look as bad
as possible just so I don't get burned in real life.
Phsst
>
> Jayson
> -----Original Message-----
> From: Fred [mailto:fctonetti@x...]
> Sent: Friday, March 28, 2003 1:44 PM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: TRENDING vs. RANGING markets (phsst)
>
>
> Jayson,
>
> I would agree with your comment regarding the desire of system
> performance to be superior to buy and hold as far as your statement
> goes. In my view this is not as simple as comparing returns between
> one and the other as it should also at least include an evaluation of
> the negatives as well.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Jayson" <jcasavant@xxxx> wrote:
> > Psst,
> >
> > "I consider the draw down figures to be suspect along with the
> Return on
> > Account percentage, and the Buy and Hold data presented is useless
> to me."
> >
> > I am curious, my goal is to out perform Buy and Hold, if I cannot
> what is
> > the point of putting in all the extra effort? Could you perhaps
> explain why
> > you feel this number is of no use?
> >
> >
> >
> > Jayson
> > -----Original Message-----
> > From: phsst [mailto:phsst@x...]
> > Sent: Friday, March 28, 2003 1:22 PM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] Re: TRENDING vs. RANGING markets (phsst)
> >
> >
> > Fred,
> >
> > They are indeed tough questions.
> >
> > When backtesting entire markets of stocks, the figures that I rely
> > upon from the System Report are:
> >
> > 1) # Trades
> > 2) # Winners
> > 3) # Losers
> > 4) Percent Profitable
> > 5) Profit from winners MINUS Loss from Losers (wish Tomasz would
> > display this figure as "Net Profit".
> > 6) The avg data about # bars / winner or loser
> > 7) Risk adj Annual Return
> >
> > I consider the drawdown figures to be suspect along with the Return
> on
> > Account percentage, and the Buy and Hold data presented is useless
> to me.
> >
> > Have a good weeekend.
> >
> > Phsst
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> > > Phsst,
> > >
> > > These are all tough questions and would be best answered by the
> > > author. In regards to some of your other questions, I personally
> > > find all measurements in terms of percents much more informative
> than
> > > measurements in terms of dollars for the reasons you state. I
> don't
> > > think the MaxDD% that the reports show when trading more than one
> > > vehicle simultaneously are accurate as presented in terms of
> account
> > > balance but then I am not the author and I have not put much
> effort
> > > into this area as in general this is not something I do or at
> least
> > > not within a single account.
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "phsst" <phsst@xxxx> wrote:
> > > > Fred,
> > > >
> > > > No offense taken. System report is below. I set up the backtest
> > > using
> > > > $20K per trade with no compounding.
> > > >
> > > > Let me ask some questions about Amibroker's System Test Report
> and
> > > the
> > > > Equity function(s):
> > > >
> > > > If a system generates hundreds of trades over a 10 year
> backtest,
> > > does
> > > > AB's sort all of the trades chronologically and then report
> dd's and
> > > > equity chronologically, or are the System Report figures
> generated
> > > > from the alphabetically sequenced trades (which would render the
> > > > report meaningless)?
> > > >
> > > > And further...
> > > >
> > > > What real value are the reported drawdown figures? For example
> > > > starting with $20,000 and then after a few years of using a
> trading
> > > > system that accumulates a portfolio worth over $1,000,000...
> what
> > > does
> > > > a reported Max. system drawdown of $-67,000 and a Max. system %
> > > > drawdown of -73.09% really represent? Are the dd% figures based
> upon
> > > > the original $20 portfolio or are they calculated on the value
> of
> > > the
> > > > portfolio at the time the dd occurs? I know for example that
> the
> > > > system never experienced a -73% drawdown as measured by current
> > > > portfolio value (single digit dd% are more like what I observed
> > > > analyzing the trades in Excel).
> > > >
> > > > And the reported Max. system drawdown of -67,047 might be
> > > devastating
> > > > against a $100K portfolio, but it is just a minor cost of doing
> > > > business when measured against a trading system that has
> generated
> > > > profit from winners of $3,232,044.
> > > >
> > > > And what is the difference between max system drawdown and max
> trade
> > > > drawdown since they are the same figure?
> > > >
> > > > One more question... I don't understand what the
> reported "Total net
> > > > profit: 13642497.00" figure is or how it is calculated.
> > > >
> > > > As you can see, since there are many things I don't understand
> about
> > > > the Amibroker System Test Report, I use my own methods of
> rooting
> > > out
> > > > the viability of my trading systems.
> > > >
> > > > Anyway, here is the report: Let me know how you would interpret
> this
> > > > reported data. Sorry if I sound 'dense', but when I don't
> understand
> > > > exactly how a reporting tool works, then I tend to ignore it
> and do
> > > my
> > > > own due diligence.
> > > >
> > > > Overall performance summary
> > > >
> > > > Total net profit: 13642497.00 Total commissions paid: 56136.00
> > > > Return on account: 7.74 % Open position gain/loss 0.00
> > > > Buy&Hold profit: 147573728.28 Bars (avg. days) in test:
> 14623657
> > > (2407)
> > > > Buy&Hold % return: 83.73% System to Buy&Hold index: -90.76%
> > > >
> > > > Annual system % return: 1.14% Annual B&H % return: 9.66%
> > > >
> > > > System drawdown: -13959.68 B&H drawdown: -19973.34
> > > > Max. system drawdown: -67047.75 B&H max. drawdown: -
> 76699124.91
> > > > Max. system % drawdown: -73.09% B&H max. % drawdown: -99.91%
> > > > Max. trade drawdown: -67047.75
> > > > Max. trade % drawdown: -65.76%
> > > > Trade drawdown: -11338.25
> > > >
> > > > Total number of trades: 2339 Percent profitable: 49.8%
> > > > Number winning trades: 1165 Number losing trades: 1174
> > > > Profit of winners: 3232044.21 Loss of losers: -1308737.32
> > > > Total # of bars in winners: 6062 Total # of bars in losers:
> 3072
> > > > Commissions paid in winners: 27960.00 Commissions paid in
> losers:
> > > > 28176.00
> > > >
> > > > Largest winning trade: 53881.50 Largest losing trade: -
> 11231.63
> > > > # of bars in largest winner: 7 # bars in largest loser: 2
> > > > Commission paid in largest winner: 24.00 Commission paid in
> > > largest
> > > > loser: 24.00
> > > >
> > > > Average winning trade: 2774.29 Average losing trade: -1114.77
> > > > Avg. # of bars in winners: 5.2 Avg. # bars in losers: 2.6
> > > > Avg. commission paid in winner: 24.00 Avg. commission paid in
> > > loser:
> > > > 24.00
> > > > Max consec. winners: 7 Max consec. losers: 5
> > > >
> > > > Bars out of the market: 14606727 Interest earned: 11718469.88
> > > >
> > > > Exposure: 0.1% Risk adjusted ann. return: 142.34%
> > > > Ratio avg win/avg loss: 2.49 Avg. trade (win & loss): 822.28
> > > > Profit factor: 2.47
> > > >
> > > > Regards,
> > > >
> > > > Phsst
> > > >
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, Fred Tonetti <ftonetti@xxxx>
> > > wrote:
> > > > > Phsst,
> > > > >
> > > > > This is not meant to offend, but posting a %Return compounded
> or
> > > not is
> > > > > not what I'd call results.
> > > > >
> > > > > There isn't enough there to judge whether or not a particular
> > > avenue is
> > > > > even worth investigating. If the system has low dd's and a
> fairly
> > > > > straight equity curve then it's probably at least worth some
> > > > > investigation.
> > > > >
> > > > > I'll go a little farther then a single number since pictures
> are
> > > usually
> > > > > worth more than words . especially when they have statistics
> > > associated
> > > > > with them.
> > > > >
> > > > > PS I changed the equity line indicator recently to use a
> > > multilane title
> > > > > for the statistics and reposted it in the files section.
> >
> >
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