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Brian:
Thanks for all the insight. The basic trade metrics can clearly
expressed in different ways.
Like most others I would struggle with Turtles like metrics and prefer a
lower Loss Ratio, hence I currently use Expectancy/Loss ratio as my
preferred personal metric: minimise risk of ruin and keeps one in the game.
Looks like I need to look into adding or combining this with CAR somehow.
Thanks for the interesting point of view: I will chew on these awhile.
Regards
ChrisB
brian_z111 wrote:
>
> Chris,
>
> Re Profit Factor and Expectancy
>
> I thought you might be interested since you focus on Expectancy as
> the driver, which is similar to my focus on PF (it's the first place
> I look).
>
> ProfitFactor and Expectancy are kissing cousins, mathematically and
> conceptually.
>
> > Profitunity = Expectancy per trade * number of trades per time
> period.
> >
>
> Yes, I believe VanTharp first used the term Expectancy, although I
> haven't read his book. That is what I meant (I picked the term up
> from others who must have read him).
>
> AB's version of PF is correct so that:
>
> gross profit - gross loss = net profit
> net profit/number of trades = expectancy in $ (on a per trade basis)
>
> Another way to define ProfitFactor is:
>
> Number Wins/Number Losses * average % Win/average % Loss
>
> To standardize the backtests over time I am only interested in the %
> win or loss so that is how I first started using that definition of
> PF. Then later on I started to see what a useful evaluation metric it
> was.
>
> Since I start by looking at the PF, and then look at Expectancy or
> PA% later on, I thought I would share my observations with you.
>
> When doing design work PF has the advantage of giving us two metrics
> that tell us a lot about the trade e.g. if the expectancy is OK but
> the W/L ratio is < 50% I don't like it - I am not comfortable with
> long losing sequences followed by one big win (not only
> temperamentally but also based on my rules for design).
>
> When I look at the ave%W/ave%L it tells me how much of the positive
> PF is due to the W/L ratio and how much is due to my stops e.g. you
> can leave your stops the same and change the signal to benchmark
> signals against each other.
>
> These kinds of things are vitally related to the design process.
>
> After I think I have an interesting trade I look at expectancy/PA% to
> see if I it is profitable cf to costs (commissions etc - I don't
> include commissions in backtests - I add them mentally later).
>
> Since ave%W/ave%L is only a ratio it is possible to have good PF but
> not have a paying system e.g. if your ave win is 0.2% and your ave
> loss is 0.1% you have a good ratio but you dont actually win much
> i.e. the expectancy is low.
>
> It also brings risk into the equation since if you increase the risk
> (move your stops) for the same PF the Expectancy goes up.
>
> Eventually you have to look at the %PA since that pays the annual
> grocery bill.
>
> Obviously high frequency * high expectancy is a very exciting year
> e.g. I consider turn around time for my systems - it is great to have
> a high powered trade but if you are in for two days and then have to
> wait 6 days for another trade to come along your frequency/PA% comes
> right down.
>
> There is a lot in what I am saying - I have spent 100 of hours in
> theroretical and practical consideration of evaluation - I have only
> put a cryptic explanation here.
>
> (In my first post I also meant to add that variance in the equity
> curve is derived from binomial probability of the W/L and variance in
> the distribution of the trades, where the trades are measured in %
> +_ )
>
> I understand that is probably a bit more info than you wanted but I
> have talked about it a little in the past here and there and I
> promised a couple of guys I would explain some more one day - today
> was the day.
>
> brian_z
>
> --- In amibroker@xxxxxxxxx ps.com
> <mailto:amibroker%40yahoogroups.com>, ChrisB <kris45mar@x ..> wrote:
> >
> > Hi Brian
> >
> > Thanks for this extra comment.
> >
> > Your immediate prior post had me confused because by PF I assumed
> you
> > meant Profit Factor and
> > the nearest I can understand this, is that
> >
> > Profit Factor = Gross Profit / Gross Loss
> > or as in the AB reports:
> > Profit Factor = Total Profit / Total Loss.
> >
> > I didn't understand how this related to a time series or per annum
> gain.
> >
> > However reading between the lines of this last post, I think you
> may be
> > referring to van Tharp's (was it he who coined this phrase? )
> > Profitunity factor?
> >
> > Where ....
> >
> > Profitunity = Expectancy per trade * number of trades per time
> period.
> >
> > In which case it makes a little more sense to me.
> >
> > If not, I am happy to stand corrected.
> >
> > Regards
> >
> > ChrisB
> > brian_z111 wrote:
> > >
> > > > I like PF (a derivation of it) and expectancy is really PF
> > > translated
> > > > in return over time (PA%).
> > >
> > > FTR - to explain further what I meant about PF (my take on it).
> > >
> > > PF is the trades profile (a kind of quality measure) comprising
> two
> > > components (W/L ratio and ave%W/ave%L ratio).
> > > The W/L ratio tells us something about the buy signal whereas the
> %
> > > W/L ratio tells us something about the exits (profit and loss
> stops)
> > > although they are interdependent.
> > >
> > > The W/L ratio is binomial and indicates the tendency towards runs
> > > (losing/winning streaks) and the %W/%L quantifies that e.g. as an
> > > equity curve.
> > >
> > > PF is the theoretical edge (as ratio).
> > >
> > > Looking at the two components of PF can tell us more about the
> trade
> > > than looking at PF alone.
> > >
> > > Expectancy standardises the edge (PF) to a per trade basis and
> > > quantifies it (as %).
> > >
> > > Expectancy * trade frequency (trades per periods e.g. year)
> > > quantifies the edge as return per period e.g. year.
> > >
> > > brian_z
> > >
> > > --- In amibroker@xxxxxxxxx ps.com
> > > <mailto:amibroker% 40yahoogroups. com>, "brian_z111"
> <brian_z111@ ...>
> > > wrote:
> > > >
> > > > Chris,
> > > >
> > > > > This won't help you much but I thought I would chip in here,
> > > anyway.
> > > >
> > > > On the contrary - I think it is very apt and insightful.
> > > >
> > > > > I used to spend *hours* every week manually updating data etc
> > > > > . What an agonising waste of time!.
> > > >
> > > > I agree with you.
> > > > Efficient use of time (a.k.a what works?) and leaving risk
> behind
> > > are
> > > > two major drivers behind the development of my style e.g.
> > > fundamental
> > > > analysis requires a constant renewal of information whereas with
> > > > technical analysis the acquisition phase diminishes with time.
> > > >
> > > > > Support and resistance are
> > > > > still at the same level, and is never tick precise.
> > > >
> > > > I agree S&R is not tick precise.
> > > > In fact I am inclined to the view that it is generally a little
> > > > imprecise.
> > > >
> > > > Take a classical (theortical) example of support - one buyer
> with
> > > > enough clout to make a difference is buying at a target - say
> it is
> > > a
> > > > whole number $20.00. In real life he or she is a person with
> > > emotion
> > > > so 20 becomes 19.95. Also in real life the order has to be
> > > physically
> > > > filled so spreads and market movement around 20.00 means 'buy at
> > > 20'
> > > > becomes +- 0.20.
> > > >
> > > > I am not a long term intraday trader but my observations so far
> at
> > > > that S&R are easily identified on intraday charts than EOD
> charts.
> > > >
> > > > > The issue is: is the expectancy positive and can I continue to
> > > > >trade
> > > > > this. All three maintained a positive expectancy and when this
> > > fell
> > > > >away
> > > > > this was the "stop trading this system" signal.
> > > >
> > > > I agree that expectancy is a significant metric.
> > > > I like PF (a derivation of it) and expectancy is really PF
> > > translated
> > > > in return over time (PA%).
> > > >
> > > > PF is like the HP of an engine.
> > > > The more grunt you have the less you are affected by the little
> > > bumps
> > > > (data errors, slippage, variance etc).
> > > >
> > > > Even a coin with a strong bias will produce its run of outs.
> > > >
> > > >
> > > > Thanks for your post,
> > > >
> > > > Good stuff.
> > > >
> > > > brian_z
> > > >
> > > >
> > > >
> > > > --- In amibroker@xxxxxxxxx ps.com
> > > <mailto:amibroker% 40yahoogroups. com>, ChrisB <kris45mar@> wrote:
> > > > >
> > > > > Brian
> > > > >
> > > > > This won't help you much but I thought I would chip in here,
> > > anyway.
> > > > >
> > > > > I used to spend *hours* every week manually updating data,
> > > checking
> > > > > splits consolidations rights issues etc every week with data
> from
> > > > > Justdata comparing with ASX published data in the back of the
> old
> > > > Shares
> > > > > magazine. What an agonising waste of time!.
> > > > >
> > > > > Now I only look at Fx. With this being retail broker based the
> > > data
> > > > is
> > > > > never clean.
> > > > >
> > > > > Toward the end of last year I ran a simple once a day system
> on
> > > > three
> > > > > different (demo: yes I know) platforms, entering Limit entries
> > > for
> > > > the
> > > > > day in the morning and off to work for the day, as a kind of
> real
> > > > time
> > > > > walk forward test. Surprising how much time this took to do.
> > > > >
> > > > > In the evening most times all three platforms had either
> filled
> > > my
> > > > > orders or not, but it was surprising to see how many times
> > > > Platform1 and
> > > > > Platform2 would have filled my limit entry, and one of them
> had
> > > got
> > > > > stopped out, whereas the other had got to the Take Profit. On
> > > other
> > > > days
> > > > > Platform1 and Platform2 would have filled my entry order but
> > > > Platform3
> > > > > ran without me: a missed trading opportunity.
> > > > > At the end of the month all three platforms were in profit,
> just
> > > by
> > > > > different amounts.
> > > > >
> > > > > Because I get my Fx data through MT3 plugin these are not
> exactly
> > > > the
> > > > > same prices as my live trading account.
> > > > > To be honest I don't think this matters. Support and
> resistance
> > > are
> > > > > still at the same level, and is never tick precise.
> > > > > Others may choose to disagree.
> > > > >
> > > > > Just following three Fx data providers will show you by how
> much
> > > > each
> > > > > can differ, notwithstanding the different time zones and
> > > therefore
> > > > > differing candles we get. And that is not even talking about
> > > > economic
> > > > > news times!
> > > > >
> > > > > The lesson for me was clear : the individual trade result is
> > > > irrelevant.
> > > > > The issue is: is the expectancy positive and can I continue to
> > > > trade
> > > > > this. All three maintained a positive expectancy and when this
> > > fell
> > > > >away
> > > > > this was the "stop trading this system" signal.
> > > > >
> > > > > That to me is one of the advantages of Fx : no database
> hassles.
> > > No
> > > > > company reports, no shareholder statements, no Chess holder
> > > > statements
> > > > > and the inevitable shareholder bits of paper coming through
> the
> > > > mail
> > > > > after I have long closed the trades.
> > > > >
> > > > > The other way to think about it would be: well if Provider1
> has
> > > > > different Ticks to Provider2, just backtest and optimize for
> each
> > > > > respectively over the same time frame and the same tickers. If
> > > your
> > > > > parameters and results differ widely this may be a message
> that
> > > > your
> > > > > system is marginal. On the other hand, if all is well and the
> > > > results
> > > > > are very similar, you have just done your own "should I care
> how
> > > > clean
> > > > > my data is?" test.
> > > > >
> > > > > Regards
> > > > > ChrisB
> > > > >
> > > > > brian_z111 wrote:
> > > > > >
> > > > > > Steve,
> > > > > >
> > > > > > I would like to know how I can decide if EOD data is clean
> or if
> > > > > > intraday data is up to the demands.
> > > > > >
> > > > > > It is a subject that I don't see much quality discussion on.
> > > > > >
> > > > > > For EOD data my best ideas so far are:
> > > > > >
> > > > > > 1) Data includes raw data - I can compare raw data to other
> > > > providers
> > > > > > raw data - I can't compare it to an absolute benchmark
> because
> > > > there
> > > > > > isn't one.
> > > > > >
> > > > > > 2) Data inlcudes a record of all split events and the
> > > > corresponding
> > > > > > split factor I can check the event records independently and
> > > check
> > > > > > the math.
> > > > > >
> > > > > > 3) I can apply the split factor or see the results of it's
> > > > > > application so I can check the math.
> > > > > >
> > > > > > 4) The event calendar should inlcude non-trading days for
> the
> > > > market
> > > > > > and stand down trading days for companies.
> > > > > >
> > > > > > 5) Data can be padded or unpadded (optional).
> > > > > >
> > > > > > I can't think of any other way to measure data quality.
> > > > > >
> > > > > > I don't think any data provider meets the criteria - maybe a
> > > few.
> > > > > >
> > > > > > For intraday:
> > > > > >
> > > > > > What could I possibly do?
> > > > > >
> > > > > > Buy raw tick data from several providers, compare them for a
> > > > > > consensus and filter it myself ?
> > > > > >
> > > > > > I am at a loss on that one.
> > > > > >
> > > > > > Of course another option is to trade in such a way that bad
> > > ticks
> > > > and
> > > > > > unclean EOD data don't affect the outcomes very much (that
> > > could
> > > > be a
> > > > > > lot easier than the above).
> > > > > >
> > > > > > brian_z
> > > > > >
> > > > > > --- In amibroker@xxxxxxxxx ps.com
> > > > > > <mailto:amibroker% 40yahoogroups. com>, "scourt2000"
> > > > <stevehite@ ..> wrote:
> > > > > > >
> > > > > > >
> > > > > > > Mark,
> > > > > > >
> > > > > > > No successful intraday real-time trader who does this
> full-
> > > time
> > > > > > would
> > > > > > > ever drop eSignal for Gary's new real-time service.
> > > > > > >
> > > > > > > It's a pennywise and pound-foolish decision.
> > > > > > >
> > > > > > > He's fine for clean end-of-day data. But he's way out of
> his
> > > > > > league
> > > > > > > for the demands of intraday real-time trading.
> > > > > > >
> > > > > > >
> > > > > > > --- In amibroker@xxxxxxxxx ps.com
> > > > > > <mailto:amibroker% 40yahoogroups. com>, "MarkK" <MailYahoo@>
> > > wrote:
> > > > > > > >
> > > > > > > > Brian,
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > > So far I am very happy with the QP RT beta testing
> > > > > > > >
> > > > > > > > I believe that when it goes live they will be taking a
> lot
> > > of
> > > > > > > customers away
> > > > > > > > from the other services
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > > It is a much better value than other things out there,
> and
> > > so
> > > > far
> > > > > > > the data
> > > > > > > > has been accurate
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > > MarkK
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > > _____
> > > > > > > >
> > > > > > > > From: amibroker@xxxxxxxxx ps.com <mailto:amibroker%
> > > > 40yahoogroups. com>
> > > > > > [mailto:amibroker@ yahoogrou ps.com <mailto:amibroker%
> > > > 40yahoogroups. com>]
> > > > > > > On Behalf
> > > > > > > > Of brian_z111
> > > > > > > > Sent: Friday, February 15, 2008 7:47 AM
> > > > > > > > To: amibroker@xxxxxxxxx ps.com <mailto:amibroker%
> > > > 40yahoogroups. com>
> > > > > > > > Subject: [amibroker] Re: AP's RT data feed - for MarkK
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > > > I am looking for an RT data provider. I used eSignal
> for a
> > > > > > couple
> > > > > > > > >of years, then quit and am ready to resart, but don't
> likr
> > > > their
> > > > > > > > >fees.
> > > > > > > >
> > > > > > > > QuoteTracker and LiveCharts have the $60 and $20
> version of
> > > > > > eSignal
> > > > > > > > if you don't mind less backfill and fewer symbols.
> > > > > > > >
> > > > > > > > I have read of a few issues with LiveCharts but surely
> we
> > > can
> > > > > > make
> > > > > > > it
> > > > > > > > work (a lot of the problems also came about because
> people
> > > > still
> > > > > > > > wanted it free after it changed to pay for play a year
> ago -
> > >
> > > > of
> > > > > > > > course it doesn't work if ou don't pay).
> > > > > > > >
> > > > > > > > A couple of users said it was slow - I don't know - I
> > > haven't
> > > > > > tried
> > > > > > > > it yet but I will.
> > > > > > > >
> > > > > > > > brian_z
> > > > > > > >
> > > > > > > > --- In amibroker@xxxxxxxxx <mailto:amibroker%
> > > 40yahoogroups.
> > > > com>
> > > > > > > ps.com, "Ara
> > > > > > > > Kaloustian" <ara1@> wrote:
> > > > > > > > >
> > > > > > > > > Mark,
> > > > > > > > >
> > > > > > > > > I am looking for an RT data provider. I used eSignal
> for a
> > > > > > couple
> > > > > > > > of years, then quit and am ready to resart, but don't
> likr
> > > > their
> > > > > > > fees.
> > > > > > > > >
> > > > > > > > > Would you elaborate a bit on AP. Never heard of them
> > > > > > > > >
> > > > > > > > > Tx
> > > > > > > > >
> > > > > > > > > Ara
> > > > > > > > > ----- Original Message -----
> > > > > > > > > From: MarkK
> > > > > > > > > To: amibroker@xxxxxxxxx <mailto:amibroker%
> 40yahoogroups.
> > > > com>
> > > > > > > ps.com
> > > > > > > > > Sent: Friday, February 15, 2008 3:36 AM
> > > > > > > > > Subject: RE: [amibroker] New EOD data feed other than
> > > Quotes
> > > > > > Plus
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > Dan,
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > I use QP for EOD data, and am happy with the
> fundamental
> > > > data
> > > > > > > > that they provide. Not sure there is another service
> that
> > > > offers
> > > > > > as
> > > > > > > > much in that area
> > > > > > > > >
> > > > > > > > > I also use Fast Track for EOD data. Some market
> internal
> > > > data,
> > > > > > > > no fundamental data to speak of, however the data has
> been
> > > > > > cleaner
> > > > > > > > than QP EOD day data. For Mutual fund data not sure
> there
> > > is a
> > > > > > > > better service out there.
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > Have been an e-signal subscriber for RT data now for 4
> > > > years. I
> > > > > > > > cancelled my subscription since they kept raising their
> > > > prices,
> > > > > > and
> > > > > > > > went to IQ feed. Used them for a month then they raised
> > > their
> > > > > > > > prices. Luckily I was abe to beta test AP's RT data
> feed.
> > > So
> > > > far
> > > > > > > > they have been very responsive on the changed needed to
> > > make
> > > > it
> > > > > > an
> > > > > > > > excellent RT service, and at a reasonable price.
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > I would suggest you get hold of Gary at QP and let him
> > > know
> > > > > > about
> > > > > > > > your issue. I would think you will become a satisfied
> > > customer
> > > > > > once
> > > > > > > > again
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > MarkK
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > ------------ --------- --------- --------- --------- -
> ----
> > > --
> > > > -- -
> > > > > > > > ----------
> > > > > > > > >
> > > > > > > > > From: amibroker@xxxxxxxxx <mailto:amibroker%
> > > 40yahoogroups.
> > > > com>
> > > > > > > ps.com
> > > > > > > > [mailto:amibroker@ yahoogrou <mailto:amibroker%
> > > > 40yahoogroups. com>
> > > > > > > ps.com] On
> > > > > > > > Behalf Of Dan Clark
> > > > > > > > > Sent: Thursday, February 14, 2008 11:56 PM
> > > > > > > > > To: amibroker@xxxxxxxxx <mailto:amibroker%
> 40yahoogroups.
> > > > com>
> > > > > > > ps.com
> > > > > > > > > Subject: [amibroker] New EOD data feed other than
> Quotes
> > > > Plus
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > I've been using Quotes Plus data for the last 2-1/2
> years.
> > > > > > > > Overall, I've been very happy with Quotes Plus data and
> Gary
> > > > > > > Lyben's
> > > > > > > > (owner/president) responsiveness. That said.
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > In the last few days, I've swapped several e-mails
> about a
> > > > > > minor
> > > > > > > > billing issue (credit card renewed with different
> number)
> > > > with a
> > > > > > > > woman in his billing department. What should have been a
> > > very
> > > > > > minor
> > > > > > > > clerical issue left me feeling EXTREMELY angry and
> offended.
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > I vowed to switch my data feed from Quotes Plus to
> > > another
> > > > data
> > > > > > > > feed as soon as possible. This is a major issue for me
> > > > because of
> > > > > > > > the amount of AFL recoding involved, but I can no
> longer do
> > > > > > > business
> > > > > > > > with Quotes Plus.
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > I need some options for other EOD data feeds. What EOD
> > > > service
> > > > > > > > are you using? What has your experience been? What are
> the
> > > > > > > > alternatives now?
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > Thanks and regards,
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > Dan.
> > > > > > > > >
> > > > > > > >
> > > > > > >
> > > > > >
> > > > > >
> > > > >
> > > > >
> > > > > --
> > > > > Regards
> > > > >
> > > > > ChrisB
> > > > >
> > > >
> > >
> > >
> >
> >
> > --
> > Regards
> >
> > ChrisB
> >
>
>
--
Regards
ChrisB
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