Re: Re: RE: RE: [amibroker] Re: more positionsize results I don't

["Tomasz Janeczko" <amibroker@xxxxxx>]

Al,

It depends what you would like to calculate.
I guess your would like to have % figures related to actual trade size.
% figures calculated based on total initial equity are simply are simply
different - they measure completely different thing therefore can not
be used the way you like it.

Dollar figures on the other hand are always the same - dollar / point
calculations do not involve 'starting amount'.

I have choosen initial equity as base of percentage
profit/loss calculations because it is more straightforward and easy
to understand for the user.

Calculations based on actual (variable) trade size would cause new troubles:
lets suppose that in one trade you enter set position size to 1% of your equity
and the trade is bad enough so drawdown for this trade (measured
for actual trade size) is 50%.
Now you have second trade with position size of 10% and now you have drawdown
of 10% only.

So you have 2 drawdown figures 50% (first trade) and 10% (second trade).

When you are using TOTAL equity as a base of your calculations
the maximum drawdown would be
max(  1% (size) * 50% (drawdown), 10% (size) * 10% (drawdown) )
= max( 0.5%, 1% ) = 1%

This is 1% of TOTAL equity (very small amount because you kept 90% of equity
in cash and cash did not experience drawdown)

Now consider using actual trade size, drawdown would be
max( 50%, 10%) = 50%

It will report 50% drawdown. Is it correct figure - I guess not. After all first
trade was very small and you would have lost only 0.5% of your capital in worst point
of equity in first trade.

For me the best solution would be to use maximum trade size for that calculation,
so the formula would look like this:
max(  1% (size) * 50% (drawdown), 10% (size) * 10% (drawdown) ) / max( 1% size, 10% size)

= 1% / 0.1 = 10%

In that case the system would tell that the biggest drawdown was 10% (the drawdown
that occured in second larger trade)


Best regards,
Tomasz Janeczko
amibroker.com
----- Original Message ----- 
From: "advenosa" <advenosa@xxxxxxxxxxxx>
To: <amibroker@xxxxxxxxxxxxxxx>
Sent: Wednesday, September 17, 2003 4:51 PM
Subject: Re: Re: RE: RE: [amibroker] Re: more positionsize results I don't


> Thank you, Tomasz. I knew you'd set me straight. This leads me to ask the
> following question: often, I use a position size statement as follows:
>
> PositionSize = -1 * BuyPrice/(2*ATR(10));
>
> In this case, I'm investing 1% of my current equity in the trade, but the
> position size amount is variable because I'm mulitplying that dollar amount
> by the buyprice divided by the volatility. So, each trade will have a
> different amount invested due to differences in the buyprice and volatility.
> Perhaps that is what I meant when I said the percentage figures will be
> inaccurate and that one should use the actual dollar amounts to judge the
> performance of a system. Is this right, or am I still misstating the
> situation? Maybe the word "inaccurate" is incorrect. If so, what word would
> better represent what I'm describing? TIA.
>
> Al V.
>
>
> >On Wed, 17 Sep 2003 16:35:42  0200 Tomasz Janeczko <amibroker@xxxxxx>
> wrote.
> >Indeed esults are accurate but always related to total initial equity,
> >regardless of position size you set with each trade. If you have
> >90f equity in cash your percentage risk/drawdown/etc is of course 1/10
> >of values that you would expect trading 100f your funds.
> >
> >Best regards,
> >Tomasz Janeczko
> >amibroker.com
> >----- Original Message ----- 
> >From: "advenosa" <advenosa@xxxxxxxxxxxx>
> >To: <amibroker@xxxxxxxxxxxxxxx>
> >Sent: Wednesday, September 17, 2003 3:55 PM
> >Subject: Re: RE: RE: [amibroker] Re: more positionsize results I don't
> understand
> >
> >
> >Dave,
> >
> >On several occasions on this board, long ago, TJ said that, when using
> >positionsize statements (other than -100), any number reported in the html
> >report (like max ddnnual return, etc.) in terms of percent will not be
> >accurate since the program calculates these percentages on the basis of
> >total equity rather than amount invested per trade. The actual dollar
> >amounts are accurate, but not the percentage amounts. Since, in the -100
> >case, everything is being reinvested, the igures are accurate. But in the
> >-10 case, 90f your equity is idle and not participating in the trading,
> >so the annual returns and max dd  are much different from what they would
> >be otherwise. Perhaps one workaround might be for you to use 1/10th of your
> >equity and still use -100 as your position size to compare against the full
> >equity at -100 position size. In that case, you should get exactly the same
> >output in terms of percentages. If I said something wrong, I'm sure TJ will
> >interject here.
> >
> >AV
> >
> >>On Wed, 17 Sep 2003 09:13:32 -0400 Dave Merrill <dmerrill@xxxxxxx> wrote.
> >><html><body>
> >>
> >>
> >><tt>
> >>hi AV, thanks for stepping in.<BR>
> >><BR>
> >>the following result columns were the same at 100nd 10osition sizes;<BR>
> >>the rest were different:<BR>
> >> Trades, # of winners, # of losers, Exposure<BR>
> >><BR>
> >>looking at individual trades for the first stock, the trade dates,
> >prices<BR>
> >>and hange are the same, so the issue appears to be something about the<BR>
> >>way results are reported, not actual investment performance.<BR>
> >><BR>
> >>here's the 100ase (hope this is readable):<BR>
> >><BR>
> >>-------------------------------------------------------------<BR>
> >>Profit rofit Shares Position Cum. Profit<BR>
> >>-------------------------------------------------------------<BR>
> >>948.62 9.50bsp; 632.41 10,000.00 948.62<BR>
> >>276.68 2.50bsp; 632.41 10,948.60 1,225.30<BR>
> >>-1,122.53 -10.00bsp; 665.20 11,225.30 102.77<BR>
> >>-1,122.53 -11.10bsp; 665.20 10,102.80 -1,019.76<BR>
> >>1,526.64 17.00bsp; 604.98 8,980.24 506.88<BR>
> >>-53.07 -0.50bsp; 849.04 10,506.90 453.81<BR>
> >>420.25 4.00bsp; 840.51 10,453.80 874.07<BR>
> >>-1,087.41 -10.00bsp; 840.51 10,874.10 -213.34<BR>
> >>43.89 0.40bsp; 702.18 9,786.66 -169.46<BR>
> >>1,671.19 17.00bsp; 702.18 9,830.54 1,501.74<BR>
> >>1,955.29 17.00bsp; 1,088.92 11,501.70 3,457.03<BR>
> >>3,194.83 23.70bsp; 1,549.01 13,457.00 6,651.87<BR>
> >>1,195.99 7.20bsp; 1,471.99 16,651.90 7,847.86<BR>
> >>1,593.56 8.90bsp; 1,699.80 17,847.90 9,441.42<BR>
> >>-106.24 -0.50bsp; 1,699.80 19,441.40 9,335.18<BR>
> >>-1,933.52 -10.00bsp; 1,681.32 19,335.20 7,401.66<BR>
> >>3,518.37 20.20bsp; 1,521.46 17,401.70 10,920.00<BR>
> >>-429.13 -2.10bsp; 1,716.52 20,920.00 10,490.90<BR>
> >>0.00 0.00bsp; 1,647.51 20,490.90
> >10,490.90<BR>
> >>2,059.39 10.10bsp; 1,647.51 20,490.90 12,550.30<BR>
> >>881.85 3.90bsp; 2,015.67 22,550.30 13,432.10<BR>
> >>1,889.69 8.10bsp; 2,015.67 23,432.10 15,321.80<BR>
> >>-------------------------------------------------------------<BR>
> >><BR>
> >>here's the 10ase:<BR>
> >><BR>
> >>-------------------------------------------------------------<BR>
> >>Profit rofit Shares Position Cum. Profit<BR>
> >>-------------------------------------------------------------<BR>
> >>94.86 0.90bsp; 63.24 1,000.00
> >94.86<BR>
> >>25.51 0.30bsp; 58.31 1,009.49
> >120.37<BR>
> >>-101.20 -1.00bsp; 59.97 1,012.04 19.17<BR>
> >>-111.32 -1.10bsp; 65.97 1,001.92 -92.16<BR>
> >>168.43 1.70bsp; 66.75 990.78 76.28<BR>
> >>-5.09 -0.10bsp; 81.42 1,007.63 71.19<BR>
> >>40.49 0.40bsp; 80.97 1,007.12
> >111.68<BR>
> >>-101.12 -1.00bsp; 78.16 1,011.17 10.56<BR>
> >>4.49 0.00bsp; 71.82 1,001.06 15.05<BR>
> >>170.26 1.70bsp; 71.54 1,001.50 185.30<BR>
> >>173.15 1.70bsp; 96.43 1,018.53 358.45<BR>
> >>245.92 2.40bsp; 119.23 1,035.85 604.37<BR>
> >>76.16 0.70bsp; 93.74 1,060.44
> >680.54<BR>
> >>95.36 0.90bsp; 101.72 1,068.05 775.90<BR>
> >>-5.89 -0.10bsp; 94.22 1,077.59 770.01<BR>
> >>-107.70 -1.00bsp; 93.65 1,077.00 662.31<BR>
> >>215.58 2.00bsp; 93.22 1,066.23 877.89<BR>
> >>-22.31 -0.20bsp; 89.25 1,087.79 855.58<BR>
> >>0.00 0.00bsp; 87.28 1,085.56
> >855.58<BR>
> >>109.10 1.00bsp; 87.28 1,085.56 964.68<BR>
> >>42.88 0.40bsp; 98.01 1,096.47
> >1,007.55<BR>
> >>88.77 0.80bsp; 94.69 1,100.76
> >1,096.32<BR>
> >>-------------------------------------------------------------<BR>
> >><BR>
> >>first off, it looks like eturns are rounded to tenths of a percent.
> >this<BR>
> >>and other rounding may make a difference, but if that's the only issue,
> >it's<BR>
> >>surprising to me how significant it is. outside of that and the x10
> >scaling,<BR>
> >>rofit is the same for each trade. I tried rasing the initial account<BR>
> >>equity to $1M, and percentages stayed the same.<BR>
> >><BR>
> >>by the end, the 100ersion has made a profit of $15,321.80 or 143.2f<BR>
> >>its original $10k investment. the 10ersion has made $1,096.32, only<BR>
> >>99.63f its original $1k.<BR>
> >><BR>
> >>things diverge immediately. the first trade is reported as making $948.62,
> >a<BR>
> >>9.50rofit in the 100ase, and making $94.86, a 0.90rofit in the 10R>
> >>case. odd, especially seeing as the reported profit s higher in the 100R>
> >>case, but the dollar amount is a smaller fraction.<BR>
> >><BR>
> >>simple version: I have 10 stocks, the worst performing of which
> >returned<BR>
> >>more than 150rofit that year when traded this way, if you believe the<BR>
> >>100esults. investing the entire account equally in all of them should<BR>
> >>give at least a 150rofit overall, by any intuitive logic I can see.<BR>
> >>returns should actually be considerably better than that minimum, since
> >all<BR>
> >>but 2 give over 200eturn, and 3 are over 500but when I do that equal<BR>
> >>split in AB, the individual stock returns are way lower, and the
> >overall<BR>
> >>return is about 17BR>
> >><BR>
> >>big difference. one's not too shabby, the other's well below the 21.95R>
> >>return of !COMP that year.<BR>
> >><BR>
> >>???<BR>
> >><BR>
> >>dave<BR>
> >><BR>
> >>==========================================================================<BR>
> >>AV wrote:<BR>
> >><BR>
> >>When comparing 100s. 10osition sizes without changing anything else,<BR>
> >>even though you got different profits, was everything else the same (i.e.,
> >R>
> >>profitable trades, W/L ratio, profit factor, no. of trades, etc.,
> >etc.)?<BR>
> >>When you set positionsize = -10, you are committing 10f your current<BR>
> >>equity to each trade and reinvesting the profits from that trade into
> >the<BR>
> >>next one, etc. The other 90s sitting idle. It's as if you set your<BR>
> >>position size at -100 but your equity at 1/10 the equity of the -100<BR>
> >>scenario. Also, do you have positionsize shrinking checked or unchecked?
> >If<BR>
> >>it was unchecked, you might not have had enough equity to have made a
> >trade<BR>
> >>using the -10 setting as in the -100 setting, although with stocks,
> >since<BR>
> >>you can buy 1 share at a time, this shouldn't be a problem. I can't think
> >of<BR>
> >>anything else that could be giving you these differences. Fred
> >suggested<BR>
> >>that the -100 situation should give 10 times the profits as the -10<BR>
> >>situation. However, since the compound interest equation is involved in
> >the<BR>
> >>computations, I suspect that the differences may not be linear as Fred<BR>
> >>suggested.<BR>
> >><BR>
> >>AV<BR>
> >><BR>
> >></tt>
> >>
> >><br>
> >>
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