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I've
been playing with the question I asked about can CAR be calculated just on the
data in the Optimizer data and it looks like a close approximation can be
achieved by multiplying the RAR ann by the Exposure (percentage divided by
100).
<SPAN
class=343544816-17042003>
<SPAN
class=343544816-17042003>Fred - what do you think?
<SPAN
class=343544816-17042003>
<SPAN
class=343544816-17042003>d
<FONT
face=Tahoma size=2>-----Original Message-----From: dingo
[mailto:dingo@xxxxxxxxxx] Sent: Thursday, April 17, 2003 12:35
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: RE: [amibroker]
Re: To compound or not to compound... that is the
question
The
big pain in the butt with CAR, and MAR is that those columns are not in the
CSV file produced by the Optimizer and there is no way to addcolumn to that
data. So, you to do it manually. Do you know a way that CAR can be
calculated using just the data from the optimizer? (Don't look at the backtest
results)
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>d
<FONT
face=Tahoma size=2>-----Original Message-----From: Fred
[mailto:fctonetti@xxxxxxxxx] Sent: Thursday, April 17, 2003 12:22
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker]
Re: To compound or not to compound... that is the
questionCAR = Cumulative Annual Return and is the
same as annual system % return in the AB Performance ReportMDD =
Maximum System % Drawdown and is in the AB Performance ReportMAR =
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@xxxx]>
> > 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@xxxx]> > > > 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@xxxx]>
> > > 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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