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So the estimated MaxDD is based on what ? an indivdiual trade ?
initial equity ? the account balance at any given point in time ?
--- In amibroker@xxxxxxxxxxxxxxx, "quanttrader714"
<quanttrader714@xxxx> wrote:
> It's late and I've had too much scotch, so one very quick example
> which I'll explain the basics of but would like to have someone else
> please take a stab at interpreting.
>
> To recap the Robustness Criteria, Condensed Version 1-5:
>
> 1. Test on small, mid & large cap stocks in bull, bear & sideways
> markets.
> 2. Evaluate performance on top 20% most actively traded small, mid &
> large cap stocks.
> 3. Graph and evaluate system performance consistency (%profit/trade
> and % profit/bar) on select stocks.
> 4. Perform simulation to estimate probability of profit in 10 trades
> (for select stocks).
> 5. Perform simulation to estimate future drawdown (for select
stocks).
>
> For this example I picked a stock, any stock. I think everyone gets
> what I mean by criteria 1 and 2 (whether they agree or not), correct
> me if I'm wrong. I've posted the output of criteria 3-5 in the
> example folder in the photos section. Criterion 3 output is photos
1
> and 2, criterion 4 output is photos 3 and 4, and criterion 5 output
is
> photos 5 and 6. I think the criterion 3 graphs are self
explanatory.
> On criterion 4, forget how it's calculated for now. It estimates
the
> probability of profit (and how much) at the end of 10 trades. Unit
of
> measure is % of starting equity. Looking at the histogram, the
> highest bin (the mode of the distribution) is 19.16 -- 29.63 which
> means approx 15.5% of the time (y axis) the profit at the end of 10
> trades fell in this bin, between 19.16% and 29.63% of initial
equity.
> The cumulative distribution graph is the histogram in cumulative
> form and shows the likelihood that a result falls below the value on
> the x axis. For example, 20% of the simulations (of the sum of 10
> trades) lost money so you can *estimate* there's an 80% chance
you'll
> be profitable after 10 trades with this. Same unit of measure for
max
> dd and those graphs are read the same way. P.S. Each simulation was
> 1000 runs, so the graphs of criterion 3 show one actual pass through
> the data by AB, while the others depict the collective results of
1000
> simulated runs (and include my adjustment factor).
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