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In your expectancy formula, are you calculating Avg Profit and Avg
Loss as % (as it appears in your formula)? Because expectancy
formulas quote the profits and losses in dollar amounts, like this:
(%Wins x Avg Profit $) - (%Losses x Avg Loss $)
Could this account for the difference of opinion that you and Tomasz
have? Expectancy tells you what dollar amount you can expect to win
or lose per dollar amount risked, which doesn't vary with leverage.
Buying $10,000 worth of stock puts $10,000 at risk, but so does
buying $10,000 of stock on margin with $5,000, it's just that you're
borrowing the other $5K. Using leverage allows you to increase the
size of the profits and losses, but doesn't change the expectancy.
Luck,
Sebastian
--- In amibroker@xxxxxxxxxxxxxxx, Bert Steele <bistrader@xxxx> wrote:
> No need to be sorry as sharing is just fine. To be clear, I am
calculating Expectancy, defined as-
>
> (%WINS x Avg Profit %) + (%LOSSES x Avg Loss %)
>
> Lets say, for example, that when ^rut is up $X over a system's buy
period, that UAPIX is up $2X. Thus, when I calculate expectancy,
lets assume that the UAPIX (which is a leverage 2 fund) is perfect
resulting in Avg Profit % and Avg Loss % being twice that of ^rut.
So, all is well.
>
> Now, lets assume that you no longer want to trade UAPIX, but would
rather trade ^rut with margin at 50 which is leverage 2. So, again
in this prefect world, when ^rut has profit of $X, ^rut on margin has
profit of $2X. So, ...
>
> Option 1: ^rut with no margin providing profit of $X
> Option 2: UAPIX as a leverage 2 fund providing profit of $2X
> Option 3: ^rut with margin at 50% providing profit of $2X
>
> Now, here is the problem as I define it. Yes, I know that Tomasz
does not agree, but this is my viewpoint. In AmiBroker, the
Expectancy for Option 3 is the same as for Option 1. My viewpoint is
that this is wrong and that the Expectancy for Option 3 should be the
same (or similar in a non-perfect world) to Option 2 as they are but
two options available with the same or similar expectancy.
>
> ...
>
>
> larypowell <larypowell@xxxx> wrote:
> Sorry to jump in here, but you are confusing return on investment
with return on equity. Larry
>
>
> ---------------------------------
> From: amibroker@xxxxxxxxxxxxxxx [mailto:amibroker@xxxxxxxxxxxxxxx]
On Behalf Of Bert Steele
> Sent: 08/31/2005 8:05 AM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: Re: [amibroker] Re: AmiBroker Support
>
>
>
>
> Hello,
>
> Just a quick note relative to your "$1000 / $47540 = 2.1%" profit
statement.
>
> Lets say that I give you $23770 to invest and you do so with ^rut
using 50% margin. At the end of the period, you send me back my
$23770, with no charge for interest because you are a nice guy, and
you also send me my $1000 profit. So, I get my calculator out as I
would like to have some idea of my percent profit. Lets see .....
$1000 profit divided by my investment amount of $23770 is 4.2%. Not
2.1% as you suggest, but 4.2%. So we do NOT agree in this case.
>
> I am so happy that I send you back the $23770 and you invest it
again but this time without margin but with a leverage 2 mutual fund
called UAPIX. Now, you are luck and during the period UAPIX goes up
exactly $1000 which is twice ^rut. So, at the end of the period you
send me the $1000 profit and my investment amount. I divide the two
again and am happy once again to have profit of 4.2%. So, we agree on
the 4.2% in this case.
>
> Finally, being pleased, I send you back the $23770 and you invest
it in ^rut with 100% margin and by chance the ^rut goes up again my
the same amount. In this case, however, you did not use margin or
leverage so the profit is $500 and not $1000. You send me the profit
and the original investment. I divide $500 by $23770 and get 2.1%.
So, we agree on the 2.1% in this case.
>
> There is nothing funny about the math. It is what one expects and
it is what is should be, in my opinion.
>
> One other thing. I had no intention, at first, of posting this
stuff here. Again, I sent it to you on August 12, AmiBroker Support
on August 18th and then here on this board a week ago. I posted here
as I did not hear from AmiBroker. Also, someone else posted,
yesterday, what I thought to be a very good example and I simply
commented that I thought it was a good example thinking that it would
encourage discussion. Finally, I now believe it appropriate to
address the issues here so that others can share their "math"
opinions. As of today, you have your opinion and I have mine. There
is nothing wrong with different opinions and this forum should allow
all of us to politely provide input.
>
> Regards,
>
>
>
> Tomasz Janeczko <amibroker@xxxx> wrote:
> Hello,
>
> Since you somehow find it entertaining to move support discussion
to the list (although it is NOT the support channel),
> I can only copy-paste response I have given you
> previously on support channel.
>
> In short numbers you get from AmiBroker are correct.
> Trading leveraged instrument as UAPIX is NOT the same as trading
^RUT with margin,
> since in first case you need smaller amount of buying power to
obtain the same dollar profit.
> Since buying power is different, percentage profit with same dollar
profit differs
> (or with the same percent profit, dollar profits are different).
This is so because pecent profit is calculated
> as DollarProfit / EntryValue
> and EntryValue using margin account is TWICE the entry value when
not using margin.
> So even if DollarProfit is the same, percent profit is different
due to different entry value.
>
> You are focusing on your expectations how expactancy should look
like :-)
> and I am telling you how things are calculated.
>
> Expectancy is just the outcome of % profit calculations.
>
> So again:
> In this example
> we assume the following: that UAPIX movements are exactly 2x the
movement of ^RUT
> (so there is exact 2x leverage between them). (Note that this
assumption may not be true in
> reality and is used for illustration purposes only)
>
> say UAPIX moves from 23.77 to 24.77 (+4.2%) and your initial equity
is
> 23770 so you purchase 1000 shares. Your profit is $1000 and percent
profit is +4.2%
>
> At the same time ^RUT moves 2.1% from 638.67 to 652.10.
> Now your cash amount is the same as in previous case 23770 but you
are on
> 50% margin so your buying power is twice as much 2*23770 = 47540.
> So you can purchase 74.4359 shares (for simplicity
> in the example we assume that fractional purchases are possible)
> Your dollar profit is (652.10-638.67) * 74.4359 = $1000 (approx due
to rounding) - the same
> as in first case.
>
> Your PERCENT profit is however:
> $1000 / $47540 = 2.1%
>
> This is so because in second case you had to buy shares for $47540
> while in first case you only spent $23770.
>
> If you want expectancy to be the same in both cases you should not
use
> percent profits but dollar profits instead.
>
>
>
> Best regards,
> Tomasz Janeczko
> amibroker.com
> ----- Original Message -----
> From: Bert Steele
> To: amibroker@xxxxxxxxxxxxxxx
> Sent: Wednesday, August 31, 2005 2:27 AM
> Subject: Re: [amibroker] Re: AmiBroker Support
>
>
> Good example. It just does not seem correct to me. It can't be.
Yet, I have received a number of emails from Tomasz today telling me
that it is correct. I ended it ny telling him that I would get back
to him after I think about it some more and that I really believe
that is is an obvious problem. Anyway, I was just so happy that
AmiBroker finally responded. Now, I need to let others tell me that
I am either missing something (I do not think so) or that AmiBroker
needs a change. Today, I know that I am getting expectancy numbers
that are wrong with I use margin to give me leverage. So, I handle
such in Trade where the answers are what I expect.
>
> Fred Tonetti <ftonetti@xxxx> wrote: v\:* { BEHAVIOR: url
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> Looks like the attachment didn't make it in the previous post …
>
>
>
> = = = = = = = = = = = =
>
>
>
> TJ,
>
>
>
> Really ? Maybe we don't understand the statistics … See the
attachment. Same system on both sides traded without margin on the
left, with margin on the right.
>
>
>
> Should:
>
>
>
> - Avg Profit/Loss% in ALL TRADES Section
>
> - Avg Profit % in WINNERS Section
>
> - Max Trade% Drawdown
>
>
>
> be the same ?
>
>
>
> If so can you please explain ?
>
>
>
> Thanks, Fred
>
>
>
> = = = = = = = = = = =
>
>
>
> Follow up: I have made a check to verify your report about avg.
profit/loss
> and all I can say is that I can not confirm your observations.
>
> Best regards,
> Tomasz Janeczko
> amibroker.com
>
>
> ----- Original Message -----
> From: "Tomasz Janeczko" <amibroker@>
> To: <amibroker@xxxxxxxxxxxxxxx>
> Sent: Tuesday, August 30, 2005 5:51 PM
> Subject: Re: [amibroker] Is AmiBroker Support on Vacation, "rude"
or what??
>
>
> > Hello,
> >
> > I have forwarded your message to Marcin for checking in detail.
> > One thing is sure that we do not "selectively decide" what issues
to respond
> to.
> >
> > I have quickly checked the issue you mentioned and you don't ask
any question
> in it.
> >
> > All I can see are some thoghts/observations.
> >
> > Best regards,
> > Tomasz Janeczko
> > amibroker.com
> > ----- Original Message -----
> > From: "bistrader" <bistrader@>
> > To: <amibroker@xxxxxxxxxxxxxxx>
> > Sent: Tuesday, August 30, 2005 4:35 PM
> > Subject: [amibroker] Is AmiBroker Support on Vacation, "rude" or
what??
> >
> >
> >>I find it disturbing that AmiBroker Support selectively decides
what
> >> issues it wants to respond to. I have talked to several in our
> >> FastTrack group that send emails to AmiBroker Support and even
Tomasz
> >> asking for help. Oh sure, they get the standard message saying
that
> >> a response will be provided within 24 hours but they never hear a
> >> thing on what they consider to be critical items. One might ask,
why
> >> is AmiBroker Support and even Tomasz being so selective in what
they
> >> repond to? I, for one, have no idea.
> >>
> >> I certainly hope that this does not continue. I really like the
> >> software and the response by AmiBroker prior to these string of
cases
> >> has been quite good.
> >>
> >> In any case, I hope it changes. I saw a message recently where
> >> someone on this board implied that someone else was being rude.
Is
> >> it "rude" when one tells you that a response will be provided and
> >> none ever is? Is it "rude" when someone does not respond even
when
> >> repeated requests are made. I hope not. I would rather think that
> >> he/she just got caught up in the moment. An oversight, if you
will.
> >>
> >> So, if interested, think about responding to request 22642
originally
> >> sent to AmiBroker on September 12th and then again on September
> >> 18th. Try to be nice as we should all practice what we preach.
>
>
>
>
>
>
>
>
>
>
>
> ---------------------------------
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