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<SPAN
class=266261800-22102003>that's how I've approached it in general
too, eyeballing the various result outputs manually. but if possible, I'd
like to systematize it, partly so it can be an object comparison measure, and
partly so it can become a part of the trading system itself.
<SPAN
class=266261800-22102003>
<SPAN
class=266261800-22102003>do you have any sense of how that might be done? it
doesn't seem that the example you gave boils down to simply weighting and
summing the various individual metrics.
<SPAN
class=266261800-22102003>
<SPAN
class=266261800-22102003>any other ideas, anyone, on systematically combining
them some other way that captures more of what we do when we
eyeball?
<SPAN
class=266261800-22102003>
<SPAN
class=266261800-22102003>dave
<BLOCKQUOTE
>
I think there are numerous ways to evaluate your system rather than
relying on one objective function. For example, the other day, I was doing a
portfolio optimization to find out the optimum no. of positions I should have
open, given a certain amount of starting equity. I then plotted the results of
a few of the output parameters TJ now gives us in an optimization output. See
attached png file. If you were simply using one objective function (CAR)
without considering anything else, you would choose 5 open positions because
that's where CAR max'd out. However, MAR (=CAR/MDD) was still rising as was
UPI (you want that to be high), while UI (you want that to be low) was still
falling and RAR/MDD was still not max'd out yet. So, when you look at 7 open
positions, you see that UI had pretty much bottomed, UPI, RAR/MDD, and MAR had
finally topped. So, in this particular case, the optimum no. of open positions
would be selected to be 7, in my opinion, rather than 5. So, using this tiny
little example, I think you need to look at several different objective
functions and decide on the best strategy based on the total story they all
tell. I also like to use expectancy, which I think is an extremely important
and useful objective function. Sorry for the multiple answer, but I don't
think there is only one criterion upon which to judge a trading system.
Al Venosa
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