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In the case of criterion #2, it's because I believe PF is the best of
the metrics that come out of the standard AA backtest. In general, I
really like PF and prefer blunt, simple metrics so I don't have to
untangle factors or worry if some strange occurrence is giving an
unintuitive result. Not saying MAR isn't a good metric or that it's
complicated, lol, but personally prefer to look at profit and drawdown
separately (as you'll see) because I understand them more intimately
when I'm alone with them.
--- In amibroker@xxxxxxxxxxxxxxx, "advenosa@xxxx" <advenosa@xxxx> wrote:
> Mark:
>
> I may be jumping the gun somewhat with this question, and if I am,
correct,
> me, but I was wondering why you choose PF as your primary evaluation
> criterion (as opposed to, for example, MAR, which takes into
consideration
> both profit and dd at the same time)?
>
> Al Venosa
>
> Original Message:
> -----------------
> From: quanttrader714 quanttrader714@xxxx
> Date: Mon, 03 Nov 2003 15:52:47 +0000
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] On Robustness, Post #2
>
>
> <html><body>
>
>
> <tt>
> Here's Criterion #2 (from the condensed version of five total).<BR>
> <BR>
> Perform the following for each group of stocks (small, mid and large<BR>
> cap) separately. With AA range setting on a range that contains a<BR>
> bull, bear and sideways period (Mar 98- Mar03 is good enough),<BR>
> commission setting at least .5% and in the reports tab, no trades,<BR>
> backtest system on all stocks in the group. Now sort by # trades<BR>
> (with most on top). Copy and paste into a spreadsheet. *Looking at<BR>
> the top 20%* (ranked from greatest number of trades to fewest),<BR>
> determine the % of stocks that have profit factors >1 (can copy down
a<BR>
> formula such as =IF(O2>1,1,0)). Also calculate mean (average in<BR>
> Excel) and median PF of the top 20%. Looking for *minimum* >50%
with<BR>
> PFs >1, mean and median PF both >1, the higher the better.
Rationale:<BR>
> looking now to see how the system does on the stocks that it *most<BR>
> actively trades*. Depending on the system, sometimes the results of<BR>
> criterion 1 are distorted by many stocks with few trades. If the<BR>
> system fails this test it doesn't necessarily mean it's not
tradeable,<BR>
> but you need to ask yourself why.<BR>
> <BR>
> P.S. PF is the absolute value of the ratio of the profit of winners
to<BR>
> loss of losers.<BR>
> <BR>
> </tt>
>
> <br>
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