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When looking at optimization results, I try to find settings that
are good in most or all of these categories...
a. ROI ratio = ( net profit / maximum trade drawdown )
If comparing ROI ratio between systems, must use same historical
data for each system test. Look for highest ROI ratio.
b. Sharpe Ratio = measure of risk adjusted ROI.
Above 1.0 is good, above 2.0 is very good, 3.0 is excellent
Decreasing ratio means system losses hurt more than gains help.
c. K-Ratio = Detects inconsistency in returns. Measures both
profitability and consistency of returns and then returns them in
one single number.
Should be 1.0 or more.
Ratio dependent on length of historical data used.
d. Pessimistic Return to Risk Ratio (PRRR) = Large positive returns
are not penalized like with the Sharpe Ratio.
i. ADD = avg daily drawdown, AWT = avg winning trade, ALT = avg
losing trade, Wins = number of winning trades, Losers = number of
losing trades
ii. PessimisticNet = AWT*(Wins-sqrt(Wins))-ALT*(Losers+sqrt(Losers)
iii. PRRR = PessimisticNet/ADD
And I followup with an out-of-sample backtest, as well as a Monte
Carlo Simulation, to make sure the results stand up to random future
data.
Brian
--- In amibroker@xxxxxxxxxxxxxxx, "tiedemj" <home@xxx> wrote:
>
> no takers on this one ? Am I the only one pondering on this - or
is
> the answer simple and self evident?
>
> regards
>
> --- In amibroker@xxxxxxxxxxxxxxx, "tiedemj" <home@> wrote:
> >
> > Ultimately, a high CAR will give the best results overall - but
> when
> > constructiong trade systems using many symbols/stocks - RAR is
> also
> > very valuable. However, picking optimization values around an
> > extremely high RAR might lead to curve fitting (this situation
> will
> > never come around again, as this RAR might be based on a very
low
> > number of trades). So what result metrics are in your view the
> best
> > to pick optimization values on in this situation. Some
> suggestions:
> >
> > - RAR
> > - Avg Profit/Loss%
> > - Recovery Factor
> > - Profit Factor
> > - Payoff Ratio
> >
> > Or one could calculate a meassurement like:
> >
> > - RAR * CAR
> >
> > But would be interested if somebody else has grabbled with this -
> > and come to some conclusions...
> >
> > Best regards
> >
>
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