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[amibroker] Re: What is best statistic for straightness of equity curve?



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Dennis,

So where is your thinking on this now?


(I have been following and I am building to some possible input but 
since I don't understand logs and barely understand standard error I 
have had to go back to school - it takes quite a while for me to get 
my head around that stuff and interpret it into trade talk).

I have taken a different approach to evaluation (which is still a 
work in progress) and based on that I am inclined to the view that 
evaluations on one equity curve are on rather weak ground - IMO 
simulation is required for analysis of 'what counts most'.

Also I am zeroing in on the root causes of equity curve profiles and 
measuring smoothness of a curve is measuring the effect.

BTW - your pane based analysis is very interesting but I think 
ultimately it might prove to have some limitations for good 
evaluation (but not if we correctly identify root causes - we can 
just pick them out, add some mathematical antecedents and then we 
will now the answers that simulation will give us and not need to 
bother the processor - I have convinced myself that this is in my 
grasps and later I hope the maths people will connect my conceptual 
does and bingo, we are there).

However, I love your question and approach, so over to your immediate 
problem (I had it in mind to go to town on an equity curve smoothness 
metric anyway).

K-ratio is actually a risk reward metric (is that what you want)?

It also (to me) gets a little mysterious in its workings (Klestner 
doesn't fully explain one part of it - not from my, lay, point of 
view anyway).

I am still thinking about it.

So far I would say StDev is out.
StandardError will do exactly what you say you want to do (as far as 
I can tell - once again the stats teachers seem to find it hard to 
put it into trade talk - I see it explained in different ways in 
different books).

I haven't reached a final conclusion but it seems most likely that if 
you use Standard Error on a compounded equity curve with the LogN 
approach taken by Klestner you are there - no need to go past that - 
my reservation is based on the fact that I am not sure how to handle 
standardisation - I only work in relative % change - Klestner 
attempts to standardise the K-ratio - he had some trouble with it to 
start out and had to add a standardising factor.

> Everything I do is in indicator mode in realtime.  I build all my  
> metrics into my AFL.  My charts and numbers always match and all 
>my  
> settings are stored in my Flexible Parameters scheme for different  
> test systems. It is a little different approach, but that is one 
>of  
> the beauties of AB --that it allows a lot of flexibility of doing 
>your  
> own thing if you don't want to use the built-in ways.

Yes, all of my evaluation methods are home made, or adaptions of 
popular methods - works for me.

As I said - if you want all of your evaluation in one window you 
might need a math formula to sum up the transition from root cause to 
simulation (I naively believe I have the beginning and end in the bag 
and conceptually the middle formula seems attainable).

(Why don't you just start posting some of your bits and pieces, like 
your new PlotShapes PDF, to the UKB - it is a live site - we don't 
have to wait for the big bang moment to become an author - a lot of 
my stuff is mundane and/or half finished, but it still has its uses).

brian_z


--- In amibroker@xxxxxxxxxxxxxxx, Dennis Brown <see3d@xxx> wrote:
>
> Howard,
> 
> Thanks for the input.  I will investigate these some more.
> 
> However, I do not use the built-in equity functions, or any of the  
> built-in trading functions.  Tomasz has done a wonderful job with  
> these, but they do not fit well with what I am doing with my 
trading.   
> I find it easier to understand what I am getting if I write 
everything  
> myself just for my situation and not the general case.
> 
> Everything I do is in indicator mode in realtime.  I build all my  
> metrics into my AFL.  My charts and numbers always match and all 
my  
> settings are stored in my Flexible Parameters scheme for different  
> test systems. It is a little different approach, but that is one 
of  
> the beauties of AB --that it allows a lot of flexibility of doing 
your  
> own thing if you don't want to use the built-in ways.
> 
> Sometimes, you have to march to the beat of a different drummer to  
> make money in these markets.
> 
> Thanks again,
> Dennis Brown
> 
> 
> On Mar 12, 2008, at 1:38 PM, Howard B wrote:
> 
> > Hi Dennis --
> >
> > There are several metrics already built in to AmiBroker that 
measure  
> > both the steepness and smoothness of the equity curve.  Try  
> > generating a few test runs, plot their equity curves, note the  
> > values of these metrics, and see which ones best fit your 
trading  
> > personality.  A nice advantage to using these is that they 
usually  
> > tend to select trading systems that test well out-of-sample, so 
are  
> > appropriate for use with the Walk-Forward technique now also 
built  
> > in to AmiBroker.
> >
> > KRatio
> > CAR/MDD
> > RAR/MDD
> > RRR
> > RecoveryFactor
> > UlcerPerformanceIndex
> >
> > Thanks,
> > Howard
> >
> > On Tue, Mar 11, 2008 at 6:06 PM, Dennis Brown <see3d@xxx>  
> > wrote:
> > Hello,
> >
> > I have my system for intraday trading complete enough that I need 
to
> > start selecting goodness criteria for comparing variations. I have
> > selected a number of metrics to display in realtime for an n day
> > backtest like:
> >
> > total trade count
> > average bars per trade
> > winning trade %
> > trade bars % in green
> > best trade $
> > worst trade $
> > average win $
> > average loss $
> > *total profit $
> > *max draw down $
> > *EDGE (average $ per trade)
> > *I have a graph of the cumulative profit over time and an overlaid
> > straight line plot. This is the most powerful tool, because it 
lets
> > me see the real character of the system. The straighter the line, 
the
> > less likely it is over fit to the data and represents a robust 
system.
> >
> > I also have a graph of the trade equity on a trade by trade 
basis, so
> > I can see how good the entry timing is and how a trade progresses 
on
> > average or in outlier conditions.
> >
> > The * items are my key metrics for system comparison. This simple
> > system runs completely in indicator mode. I test about 1000-2000
> > trades over a 10 week test period.
> >
> > Because of the type and manner of my trades (1 futures contract 
only
> > traded during market hours), the data is easy to judge for 
goodness.
> > Since every day is an island, I could even use interesting random 
day
> > strategies for in and out of sample data, but so far I just use
> > various sequential segments.
> >
> > However, when I am spinning my scroll wheel on parameters while
> > looking at my charts, it would be nice to have a number that
> > represents how straight the equity curve is as a first pass --
> > especially for when I partially automate the optimization 
process  
> > later.
> >
> > I thought I would just take the standard deviation of the whole 
curve
> > to the straight line. This is easy. But I think some of you have
> > given this problem a lot of thought and I figured one of you may 
have
> > some additional insights into the best method for getting a 
meaningful
> > number for straightness/smoothness of the equity curve. So here I 
put
> > the question to you now with an open mind, before I become set in 
my
> > ways ;-)
> >
> > Best regards,
> > Dennis Brown
> >
> >
> >
> >
>




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