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Fred,
Perhaps it is the accepted practice to measure drawdowns from the high
of a trade and if that is so then so be it.
FWIW... I measure drawdown in terms of my available equity. (I don't
count the high price of a current stock trade as 'available equity'.
It is only equity in my mind when I close out the trade. I can afford
this latitude in measuring drawdowns because I use rigid trailing stops.
I can see where someone who had an account value at the beginning of
2000 of a million and who having never sold has an account value of
100,000 might consider it a drawdown. Fortunately, I cultivated the
practice of cutting losses years ago.
Not argueing... just telling you what is important to me.
Phsst
--- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> I understand your need to do the evaluation and as I've stated
> unfortunately there is insufficient information even from the AB
> trade list to do this. If you hold a trade for a month and for that
> trade you bought at 100 and sold at 90 what you see is a 10% loss but
> if in between the entry and exit date the stock in question reached
> 120 before going to 90 you have a 25% drawdown. This information is
> NOT available from the trade list.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "phsst" <phsst@xxxx> wrote:
> > From Fred:
> >
> > >Keep in mind when exporting available numbers even for each trade
> from AB
> > >that this does NOT allow for showing true drawdowns.
> >
> > and
> >
> > >In short, the point I'm trying to make here is that when
> developing,
> > >testing and optimizing systems IMHO the way to do so is using full
> > >compounding as to do otherwise shows erroneous results that can
> > >easilly lead one to think a system is better then it really is in
> > >terms of the negatives and worse then it really is in terms of the
> > >positives.
> >
> > Question for Fred and for TJ:
> >
> > In my post "RWT - Positionsize" I explained the need to analyze
> > backtest generated trade data in chronological order, matching
> actual
> > trading environments.
> >
> > Regarding how the Equity Indicators are calculated, is Equity
> > calculated in:
> >
> > 1) Alphabetical or Watch List Sequence
> >
> > or
> >
> > 2) Chronologically for all trades
> >
> > And regarding the compounding issue... does compounding occur on the
> > entire portfolio chronologically (the sequence in which you would
> have
> > actually made the trades) or is compounded in an issue after issue
> > after issue fashion. If it is not chronological trades using the
> > entire portfolio, then it is useless and misleading information.
> >
> > If I am right, then fixed positionsize is the only *potential* way
> to
> > analyze backtest output further. (And if I'm wrong then PLEASE let
> > someone explain why chronological analysis isn't necessary).
> >
> > Phsst
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