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[amibroker] Re: Not Compounding profits in backtester



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Tomasz

Thank you for the reply, I am very very new at the custom 
backtester, so shall have to see if I can modify the example to 
suit.  If anyone has actually coded the custom backtester to not 
compound profits, would they mind sharing how to do it? Thanks.

I thought this may have been supported simply in Amibroker by  
setting an option somewhere that I had not managed to find.

I think it is very important to be able to test without compounding 
profits for a couple of reasons.

Firstly, if you do compound profits, and use position sizing based 
on your current equity, then trades that occur later in the backtest 
have a larger weighting on the overall performance of the system 
than those that occur earlier because they have larger position 
sizes.  Even if position sizes are not based on current equity, more 
trades can be taken later in the backtest because more equity is 
available.  So backtest results are always influenced more my trades 
that occur later in the test than by those that occur earlier.  When 
I test I want all trades to have equal influence on the overall 
results regardless of when they occurred.

Secondly, performance measures such as K-Ratio that are looking a 
straightness of the equity curve, or Sharp Ratio looking for 
consistency of returns, will not work correctly if profits are 
compounded.  A compounded equity curve would ideally be exponential 
in shape, not the straight line that K-Ratio is looking for.  So for 
these type of measures to work correctly it is necessary to use a 
fixed float value right through the test.

Thirdly, in real trading, all profits can not be compounded all the 
time, as there is a requirement to pay tax on profits (unless you 
are luck enough to live in a tax free world!).

These are just my thoughts, I would be interested to hear other 
peoples opinions.

Regards
Brenton


--- In amibroker@xxxxxxxxxxxxxxx, "Tomasz Janeczko" <groups@xxx> 
wrote:
>
> 
> Hello,
> 
> Custom backtester and it is pretty easy.
> This example 
> http://www.amibroker.com/kb/2006/03/06/re-balancing-open-positions/
> 
> can be easily modifed to achieve what you after.
> 
> 
> Best regards,
> Tomasz Janeczko
> amibroker.com
> ----- Original Message ----- 
> From: "Terry" <MagicTH@xxx>
> To: <amibroker@xxxxxxxxxxxxxxx>
> Sent: Monday, January 08, 2007 4:21 PM
> Subject: RE: [amibroker] Not Compounding profits in backtester
> 
> 
> > Custom backtest procedure can do this...not a simple project.
> > --
> > Terry
> > -----Original Message-----
> > From: amibroker@xxxxxxxxxxxxxxx 
[mailto:amibroker@xxxxxxxxxxxxxxx] On Behalf
> > Of brentonfx
> > Sent: Monday, January 08, 2007 05:10
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] Not Compounding profits in backtester
> > 
> > Hi
> > 
> > I there a way to stop the backtester from compounding profits?
> > 
> > I want to simulate taking out all of my profits as they are 
earned, 
> > and continuing to trade with only my initial equity, for example 
> > $100k.  If I use fixed trade size of say $25k it's easy, I just 
set 
> > the max open positions to 4.  But I want to test a system that 
uses 
> > variable trade sizes, and if I've taken trades of less than $25k 
then 
> > I want to be able to take more than 4 trades.
> > 
> > If I don't limit the max open positions, the backtester just 
takes 
> > more and more positions at once as the test progresses and 
equity 
> > grows, so my market exposure ends up being way more than the 
$100k max 
> > that I want to limit it to at any time.
> > 
> > Is there a way to do this?
> > 
> > Thanks
> > Brenton
> > 
> > 
> > 
> > 
> > Please note that this group is for discussion between users only.
> > 
> > To get support from AmiBroker please send an e-mail directly to 
> > SUPPORT {at} amibroker.com
> > 
> > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG:
> > http://www.amibroker.com/devlog/
> > 
> > For other support material please check also:
> > http://www.amibroker.com/support.html
> > 
> > Yahoo! Groups Links
> > 
> > 
> > 
> > 
> >
>



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