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Fred,
thanks a lot for the clarification.
I found MDD column, but still can't see any thing
that resembles CAR. Is is the same as RAR column in
the optimazation report, or are u talking of some other
report.
tia
nand
--- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> CAR = Cumulative Annual Return and is the same as annual system %
> return in the AB Performance Report
>
> MDD = Maximum System % Drawdown and is in the AB Performance Report
>
> MAR = CAR / MDD This does NOT show up in the backtest reports but
can
> be calculated easilly enough.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "nkis22" <nkishor@xxxx> wrote:
> > Dimitris,
> > I want to learn some things about backtesting now. What is
> > CAR? MAR? MDD? I don't see these columns when I optimize - just
> > learnt how to run one. Is there a way to get this columns, the
only
> > one that I can see is RAR.
> >
> > tia
> > nand
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> > > Dingo,
> > >
> > > I assume you addressed this to Chuck, but I'll give you my own
> take
> > > on 1a of what you asked ...
> > >
> > > 1a. I have tried lots of combinations of things to optimize on
> and
> > > have pretty much settled on what I and some others refer to as
> MAR
> > > which is CAR / MDD. This has the advantage of finding
parameters
> > > that simultaneously elevate CAR while keeping down DD's. There
> are
> > > other steps involved here to assure that the parameters chosen
> are
> > as
> > > robust as they can be and sometimes at the cost of a little MAR
> but
> > > that's another topic. When writing systems and testing them
for
> > full
> > > compounding whether that compounding takes the form of
increased
> > bet
> > > size or increased number of simultaneous trades that can be
made,
> > the
> > > equity curve should be as close as possible to a straight line
on
> a
> > > log scale. KRatio is an indication of the straightness of the
> > equity
> > > curve but I also like to see it plotted. The other advantage
to
> > > looking at equity curves on a log scale is that for example a
10%
> > DD
> > > looks the same regardless of where on the chart it occurs. If
> you
> > > plot the equity curve on an arithmetic scale the farther to the
> > right
> > > the larger dd's occur the more insignificant (falsely) they
> appear
> > to
> > > be.
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "dingo" <dingo@xxxx> wrote:
> > > > I can understand and appreciate why you use fixed trade sizes
> in
> > > order
> > > > to get the best parameters. But how do you get a reasonable
> > measure
> > > of
> > > > drawdowns that way? Do you use some other technique to
evaluate
> > > > drawdowns?
> > > >
> > > > Re your param selection method: Do I understand the steps
> > > correctly:
> > > >
> > > > 1. You optimize for the best params
> > > > a. Based on what column or calculation?
> > > > b. What date ranges would you be using currently?
> > > > c. What subset of stocks would you be optmizing on?
> > > >
> > > > 2. You set aside the the top 100.
> > > > a. Do you set aside any at the bottom?
> > > > b. How did you determine that the first set of params
> > would
> > > be
> > > > at the edge of the parameter space?
> > > >
> > > > 3. You reoptimize the resultant set from step 2 and those are
> the
> > > ones
> > > > you use.
> > > >
> > > > Given the size of your trading capital how do you decide what
> > > stocks to
> > > > trade on a particular day?
> > > >
> > > > I'm not trying to pick a fight here I'm intensely curious as
> I've
> > > been
> > > > struggling with these questions for quite some time now.
> > > >
> > > > Thanks for any comments you choose to make.
> > > >
> > > > d
> > > >
> > > > -----Original Message-----
> > > > From: Chuck Rademacher [mailto:chuck_rademacher@x]
> > > > Sent: Thursday, April 17, 2003 6:58 AM
> > > > To: amibroker@xxxxxxxxxxxxxxx
> > > > Subject: [amibroker] To compound or not to compound... that
is
> the
> > > > question
> > > >
> > > >
> > > > Reply to Fred:
> > > >
> > > > Yes... and no.
> > > >
> > > > Absolutely, in real time trading I am compounding.
> > > >
> > > > To determine parameters via optimization.... not if my life
> > > depended on
> > > > it! And, I guess my life does depend on it, as I make my
> living
> > > > managing funds for others.
> > > >
> > > > I mentioned one trade (AOL) where my system made $1.5 million
> on a
> > > > $10,000 investment. That's not bragging... I'm sure you
could
> > come
> > > up
> > > > with a system that could achieve similar performance. Since
> the
> > > > average trade generated a profit of $2,700 for every $10,000
> > > invested,
> > > > the AOL trade could cover up lots of bad trades made using
one
> > > parameter
> > > > set. Compounding that trade would exacerbate the problem.
A
> > > minor
> > > > tweak to the parameters could cut out the AOL trade, yet that
> > very
> > > tweak
> > > > could improve performance going forward.
> > > >
> > > > When choosing parameters, I want plain vanilla trades, each
> > > standing on
> > > > their own merit, with no compounding.
> > > >
> > > > We may have to agree to disagree. It's like absolute gospel
> to
> > me
> > > and
> > > > I cannot see clear to do it any other way.
> > > >
> > > > -----Original Message-----
> > > > From: Fred [mailto:fctonetti@x...]
> > > > Sent: Thursday, April 17, 2003 3:16 AM
> > > > To: amibroker@xxxxxxxxxxxxxxx
> > > > Subject: [amibroker] FW: [aaft_ta] Re: TradingRecipes
> > > >
> > > >
> > > > Chuck,
> > > >
> > > > I'm sure you'd agree, wouldn't you ?, that one way or another
> you
> > > > compound. If you are not compounding by increasing bet size
> then
> > > you
> > > > are compounding by increasing the number of stocks you'll
> > > potentially
> > > > take simultaneous positions in as equity grows, right ?
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
> > > > <chuck_rademacher@x> wrote:
> > > > > For what it is worth, I use fixed bet size for all
> backtesting
> > > > purposes. I
> > > > > coudn't imagine backtesting/optimizing using any other
> > approach.
> > > I
> > > > even go
> > > > > a step further if I'm doing any optimizing. I recently
> posted
> > > an
> > > > equity
> > > > > curve showing something like $80 million in profit.
Within
> > that
> > > > $80
> > > > > million, the top 100 stocks (out of 13,500) generated $20
> > million
> > > in
> > > > > profits. AOL, by itself, generated $1.5 million in
profits.
> > In
> > > > each case,
> > > > > the original trade was only $10,000.
> > > > >
> > > > > As I said, I go a step further than just using a fixed bet
> > size.
> > > > After my
> > > > > first pass at optimizing, I remove the top performing 100
> > > stocks.
> > > > I then
> > > > > re-optimize without those stocks. Granted, I could end up
> with
> > > > some new
> > > > > "top" stocks. However, my objective is to remove the
> extremely
> > > > large
> > > > > winners so that the profits from those stocks don't cause
me
> to
> > > > select
> > > > > parameters on the edge of the parameter space.
> > > > >
> > > > > I don't bother removing the worst performers as the largest
> > loss
> > > > might be
> > > > > something like $16,000 (even though the original trade was
> only
> > > > $10,000).
> > > > > This can happen if a short trade goes against you.
> > > > >
> > > > > As I said... for what it's worth...
> > > > > -----Original Message-----
> > > > > From: Bob Jagow [mailto:bjagow@x...]
> > > > > Sent: Thursday, April 17, 2003 2:21 AM
> > > > > To: Amibroker
> > > > > Subject: [amibroker] FW: [aaft_ta] Re: TradingRecipes
> > > > >
> > > > >
> > > > > Re the "portfolio level testing" magic bullet.
> > > > >
> > > > > Bob
> > > > > -----Original Message-----
> > > > > From: Palmer Wright [mailto:palmerw@x...]
> > > > > Sent: Wednesday, April 16, 2003 8:27 PM
> > > > > To: aaft_ta@xxxxxxxxxxxxxxx
> > > > > Subject: Re: [aaft_ta] Fwd: Re: Available Portfolio
testing
> > > > programs for
> > > > > TS2000i
> > > > >
> > > > >
> > > > > Since Michael forwarded the two messages (see below), he
> > added
> > > > four
> > > > > additional ones. The issue about whether a "basket system"
> like
> > > > Aberration
> > > > > is worth trading I will not discuss here (I still trade
it).
> > The
> > > > other main
> > > > > issue is about the effect of compounding when testing with
TR
> > > > (Trading
> > > > > Recipes), and I comment here on that.
> > > > >
> > > > > Traders buy TR because it can test portfolios of systems
> and
> > > > markets using
> > > > > position sizing. A position-sizing strategy such as fixed-
> > > > fractional money
> > > > > management brings two advantages: it normalizes markets
(eg.,
> > > > calculating
> > > > > many contracts for corn, but few for natural gas), and
limits
> > > entry
> > > > risk for
> > > > > each position to a fixed- fraction of current equity--thus
> > > > preventing
> > > > > overtrading. If you do not use TR, I do not know how you
can
> > get
> > > > the large
> > > > > returns that compounding multiple markets can bring.
> > > > >
> > > > > Leslie Walko points to the potential danger of curve
> fitting
> > > > caused by
> > > > > compounding. I agree, and have been concerned for years
about
> > how
> > > > one market
> > > > > in a portfolio (commodity X) by being dramatically
profitable
> > in
> > > a
> > > > single
> > > > > year can misleadingly bias the results of the whole
portfolio.
> > > > >
> > > > > During a multi-year test in TR, starting equity is low,
> > perhaps
> > > > $100,000,
> > > > > but compounding raises equity to many million in later
years.
> > The
> > > > one-year
> > > > > outperformance of commodity X cand produce two kinds of
curve-
> > > > fitting bias:
> > > > > early-years bias and end-years bias. Mark Johnson's message
> > > > describes the
> > > > > first, where X gives "a big turbocharged boost" to the
> > > portfolio's
> > > > equity,
> > > > > which then gives a head-start boost to the number of trades
> in
> > > all
> > > > the
> > > > > commodities traded. The second occurs when X's monster
trades
> > > occur
> > > > in the
> > > > > final years of the simulated time period when the large
> number
> > of
> > > > contracts
> > > > > makes X's profit far larger than if its big year came
early.
> > Here
> > > > the
> > > > > profits contributed by X dwarf what they were in the first
> case.
> > > > >
> > > > > As the message from M points out, we can avoid such
biases
> by
> > > > normalizing
> > > > > with a fixed-dollar bet size in testing to remove the
> galloping
> > > > equity
> > > > > effect. I proposed this method in 1999, and still use it to
> > > compare
> > > > with the
> > > > > compounded performance. I confess, however, that my testing
> has
> > > > failed to
> > > > > find as much performance bias as I suspected I would find.
> The
> > > > method is
> > > > > most important when selecting markets for a portfolio.
> > > > >
> > > > > Palmer Wright
> > > > > ----- Original Message -----
> > > > > From: Michael Guess
> > > > > To: aaft_ta@xxxxxxxxxxxxxxx
> > > > > Sent: Sunday, April 13, 2003 9:14 AM
> > > > > Subject: [aaft_ta] Fwd: Re: Available Portfolio testing
> > > > programs for
> > > > > TS2000i
> > > > >
> > > > >
> > > > > This is for Pat Mazur & Palmer Wright. Others are
invited
> > to
> > > > comment. I
> > > > > forwarded these two messages from another list because we
> have
> > > > discussed
> > > > > these issues in the past. It appears one of the posts is
> saying
> > > > Trading
> > > > > Recipes is in error in the way it calculates. In fact, that
> it
> > > > curve fits
> > > > > data in a particular case. Comments are invited.
> > > > >
> > > > > Michael
> > > > >
> > > > >
> > > > >
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