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In the backtest report, we get average winning trade and also
the average losing trade. If we got the standard deviations of
winners and losers around the averages, it would help to see
if outlier trades are happening and whether on the long or the
short side.
nand
--- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> This brings up an interesting point or two ...
>
> 1. Unless you are testing with fixed position sizes the outliers
> should be judged based on % changes as opposed to dollar changes.
In
> fact % changes will work equally well for both.
>
> 2. I will agree that it would interesting to see if one removed
all
> the outlier trades what the results were like without reoptimizing
> and then again with reoptimizing and then after reoptimizing
looking
> at the system performance again with all the trades back in.
>
> Thought ?
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Anthony Faragasso"
<ajf1111@xxxx>
> wrote:
> > Um,
> >
> > Reading your recent post...Brings to mind what I call Outlier
> Trades.
> >
> > Outliers have some unusual property, such as excessive profit or
> loss. The
> > amount
> > of excess is measured by the number of standard deviations away
> from the
> > typical ( average )
> > value. For example, if a system's average profit is $ 200 per
> trade and the
> > standard deviation
> > is $ 50, then a trade that produces $400 profit would be ( (400 -
> 200 ) / 50
> > ) or 4 standard
> > deviations from average.
> >
> > Outliers are usually considered to be 3 or more standard
deviations
> from
> > average.
> > Essentially, they are aberrations that cause system results to be
> unfairly
> > positively or negatively
> > biased. By removing outlier trades from the evaluation process,
a
> new net
> > profit figure can be
> > calculated. This new select net profit figure, devoid of all
> aberrations,
> > may offer a cleaner, more
> > realistic trading perspective. Obviously, Trend-following
systems
> designed
> > to accept numerous small
> > losses to capture the infrequent big move rely on Outliers to be
> profitable.
> > Therefore, whether or not
> > it is better to remove outliers requires some thought.
> >
> > In general, systems that are heavily dependent on outlier trades
> have
> > artificially inflated or deflated
> > net profit results. Since Outlier trades generally do not
reoccur
> on a
> > regular basis, they should be
> > removed to present a more realistic trading perspective. The
goal
> is to
> > find a system with a select
> > ( nonoutlier ) net profit figure worthy of trading.
> >
> > Example:
> >
> > Is a system worth trading if it only generates $ 400,000 in
profit
> without
> > outlier trades as compared
> > with its original $ 500,000 ?
> >
> > Anthony
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