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In my SCHOOL we understand the 0.7 factor all too well.
They are the ones we do it for, knowing that it is worthwhile since
we are in that 0.7 group ourselves (we make sure we look after our
own, and always have done!)
brian_z *:-)
--- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@xxx> wrote:
>
> > so you still need to have metrics to evaluate what >basically
> > is forward looking performance estimates.
>
> Yes, that is exactly what I am discussing - the possibilty that the
> metrics that are currently in the public domain are not the best
> possible metrics.
>
> I am happy enough to focus on a single issue like "is smoothness of
> eq curve the metric to use for forward looking performance
estimates".
>
> At the same time I always keep three eyes on the bigger picture.
>
>
> > Your other statements seems more like motherhood statements than
> >looking for
> > the mother ship to me.
>
> I had to look up "motherhood statement" - it's a buzz term from Uni
> in the 80's - I wasn't there.
>
> http://en.wiktionary.org/wiki/motherhood_statement
>
> re: "without any specified plans for realisation"
>
> On the contrary I do have a specific plan for realisation - in fact
> privately, a method that focuses on the root causes is already well
> on the way to completion (on my computer) and I am already using
some
> new and original metrics, in my own evaluations, that the
motherhood
> statement gave birth to.
>
> I have already published some of it (informally) via this forum.
>
> Also the UKB is my chosen vehicle for semi-formal presentations but
I
> always have to consider, if I do put myself out (by making the
effort
> to 'publish') is anyone in the forum actually interested and will
> they take any notice of it anyway (I kinda like Tomasz's 0.7 factor
> as a constant).
>
> FTR my plan is to finish the task privately and also to post some
of
> my work at the UKB, thereby submitting it to peer review (as per
> accepted practice) and on from there but I reserve the right to
> change my plans (it's not a promise so no-one can come back and
> complain I didn't keep my promises).
>
> re: "a science fiction story which posits some profoundly
unsettling
> threat to the human condition, explores the implications briefly,
> then hastily retreats to affirm the conventional social and
> humanistic pieties, ie apple pie and motherhood".
>
> Science fiction won't stand up to peer group review - I am happy to
> be reviewed whenever I go public with any opinion.
>
> No one ever accused me of being brief, or of making hasty retreats
> before!
>
> cheers,
>
> brian_z
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Paul Ho" <paultsho@> wrote:
> >
> > Before One can look at OOS, Once needs to have a system or
several
> systems
> > Candidate and so you still need to have metrics to evaluate what
> basically
> > is forward looking performance estimates. Besides, just because
OOS
> says it
> > is fine, it doesnt mean it will continue into the future. And you
> are still
> > more prone to start off at the flat spot of the equity curve if
you
> have a
> > system that have more deviation from a straightness of an equity
> curve
> > regardless of how much OOS you have done.
> >
> > Your other statements seems more like motherhood statements than
> looking for
> > the mother ship to me.
> >
> >
> > _____
> >
> > From: amibroker@xxxxxxxxxxxxxxx
[mailto:amibroker@xxxxxxxxxxxxxxx]
> On Behalf
> > Of brian_z111
> > Sent: Friday, 14 March 2008 11:03 AM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] Re: What is best statistic for straightness
of
> equity
> > curve?
> >
> >
> >
> > I agree with Howard's (past) comments that the best metric is the
> OOS
> > metric (that is for those who have used optimization to design
the
> > system) or better still, several OOS metrics (if we have the
data).
> >
> > The speculative (at this stage) point that I am introducing into
> the
> > discussion is that foward looking performance can be estimated
from
> > the root causes (mechanics of the trading system).
> >
> > By continually focussing on the unknown future we are chasing
> > phantasms. While we try to catch one others are popping up
> everywhere
> > (just like a horror movie).
> >
> > Better off to find the mother ship, and understand the spawning
> > process, if we are to have any hope of dealing with the offspring.
> >
> > brian_z
> >
> > --- In amibroker@xxxxxxxxx <mailto:amibroker%40yahoogroups.com>
> ps.com,
> > "Paul Ho" <paultsho@> wrote:
> > >
> > > This particular shortcoming of Sharpe ratio as mentioned by
> Howard
> > has been
> > > well flaged by many books. and It make sense when one is
> comparing
> > PAST
> > > performance from one fund manger to another, or from one system
> to
> > another.
> > > However, when one is comparing forward looking performance,
such
> as
> > when one
> > > is developing new systems or evaulating new variations of an
> > existing
> > > system. Then IMHO this criticism is a little unjustified.
Reason:
> > If there
> > > are an equity curve in front of me, one that is with a
occasional
> > surge of
> > > profit (positive deviation) followed by a relatively flat
patch.
> I
> > wouldn't
> > > know with a lot of confidence I'm go to experience a flat patch
or
> > > continuing surge if I trade this system in the future. I have
> seen
> > a number
> > > of systems that have a very quick rise in patches during
backtest
> > and
> > > optimisation, but basically flat during forward testing. If I
> have
> > a choice,
> > > I would prefer a lower return but with less deviation (both
> > positive and
> > > negative) when I'm developing new system because I'm more
> confident
> > that it
> > > will generate a regular profit for me. I must confess I am a
> short
> > term
> > > trader, my trades last for hours to days. I can apprecriate
that
> > long term
> > > traders, those with trades lasting weeks to years, might have a
> > different
> > > psychology and can withstand large period of flat patches to
wait
> > for the
> > > big one. Of course, once I have started using a system, I'm all
> for
> > positive
> > > surprises.
> > > I personally think the biggest drawback of Sharpe ratio lies
with
> > the fact
> > > that the straightness of an equity curve cannot be adequately
> > described by a
> > > single Sharpe Ratio, because vastly different equity curves
> shares
> > similar
> > > ratio numbers. A series of Sharpe Ratios measured periodically
is
> a
> > better
> > > guide. Tuschar Chande even went as far as suggesting measuring
> > a "Sharpe
> > > Ratio" over the series of Sharpe Ratio, I think this has merit.
> > >
> > >
> > > _____
> > >
> > > From: amibroker@xxxxxxxxx <mailto:amibroker%40yahoogroups.com>
> ps.com
> > [mailto:amibroker@xxxxxxxxx <mailto:amibroker%40yahoogroups.com>
> ps.com]
> > On Behalf
> > > Of Dennis Brown
> > > Sent: Friday, 14 March 2008 4:46 AM
> > > To: amibroker@xxxxxxxxx <mailto:amibroker%40yahoogroups.com>
> ps.com
> > > Subject: Re: [amibroker] Re: What is best statistic for
> > straightness of
> > > equity curve?
> > >
> > >
> > >
> > > Howard,
> > >
> > >
> > > You make an excellent point. The metrics used to evaluate a
> system
> > needs to
> > > take into consideration the normal "character" of the trading
> > systems basic
> > > methodology.
> > >
> > > For instance my system takes small profits and losses many
times
> a
> > day. It
> > > is not biased for long or short. It does not hold overnight, It
> > only trades
> > > broad market futures. It does not compound equity. It is
goodness
> > be able
> > > to take a consistent draw from a fixed account size.
> > >
> > > This means that my system will be subject to very different
> market
> > forces
> > > than a system that swing trades stocks for a week or two, and
is
> > subject to
> > > overnight gaps, company earnings announcements, dividends,
> interest
> > rates
> > > (on margin accounts), and other unpredictable events.
> > >
> > > My system will perform with a much smoother equity curve just
> > because of the
> > > way it is defined. Commissions and Bid/Ask spreads are the main
> > hurdles to
> > > profitability, but they are constants.
> > >
> > > I have a much easier time telling if my system is robust.
> > >
> > > Best regards,
> > > Dennis
> > >
> > >
> > > On Mar 13, 2008, at 1:01 PM, Howard B wrote:
> > >
> > >
> > >
> > > Greetings all --
> > >
> > > Professional money managers are sometimes evaluated based on
the
> > Sharpe
> > > Ratio of their performance, so it has some value. But, in my
> > research, I
> > > have not found Sharpe Ratio to be a very good metric for use
when
> > developing
> > > systems. Yes, higher Sharpe Ratios will have smaller standard
> > deviations
> > > than lower Sharpe Ratios, but the standard deviation includes
> both
> > positive
> > > and negative deviations. That is, it penalizes both positive
and
> > negative
> > > performance. If you are designing trend following systems with
> > long holding
> > > periods, and looking for the infrequent large gains associated
> with
> > this
> > > type of system, Sharpe Ratio penalizes these. When Sharpe Ratio
> is
> > used as
> > > the objective function in an automated walk forward process,
> systems
> > > selected as the best in-sample often perform much less well out-
> of-
> > sample
> > > than systems selected using K-Ratio, RRR, CAR/MDD, or UPI.
> > >
> > > Thanks for listening,
> > > Howard
> > >
> > >
> > >
> > > On Wed, Mar 12, 2008 at 10:33 PM, Paul Ho <paultsho@xxxxxx
> > > <mailto:paultsho@> com.au> wrote:
> > >
> > >
> > >
> > >
> > > Time doesnt permit me to write a long post. But I think Jack
> > Schwager in one
> > > of his books povides a very good description of what You want.
> > Tuschar
> > > Chande also has insights.
> > > One such parameter is the Sharpe ratio, but you need use it
> slightly
> > > differently. Firstly, take risk free return as zero, and you
are
> > obtaining
> > > the ratio of mean return to std deviation. Secondly, calculated
> > yearly
> > > sharpe ratios and compare them from year to year.
> > >
> > >
> > > _____
> > >
> > > From: amibroker@xxxxxxxxx <mailto:amibroker@xxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com> ps.com> ps.com
> > > [mailto:amibroker@xxxxxxxxx <mailto:amibroker@xxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com> ps.com>
> > ps.com] On
> > > Behalf OfDennis Brown
> > > Sent: Thursday, 13 March 2008 12:24 PM
> > > To: amibroker@xxxxxxxxx <mailto:amibroker@xxxxxxxxx
> > <mailto:amibroker%40yahoogroups.com> ps.com> ps.com
> > > Subject: Re: [amibroker] Re: What is best statistic for
> > straightness of
> > > equity curve?
> > >
> > >
> > >
> > > Brian,
> > >
> > > Thanks for your reply.
> > >
> > > My thinking is that the Std Error will work. I do not need to
use
> a
> > > Log function on my equity curve, because I do not compound my
> > results,
> > > so they are linear. I also base my work on constant range bars,
> so
> > > that linearizes the curves even more. Profit potential can only
> > come
> > > from price movement. The smoothest and straightest equity
curves
> > come
> > > from the most robust systems. Period. You can look at the curve
> and
> > > judge it, or find a number that is associated with this
property.
> > >
> > > However, step functions get introduced into your nice trading
> > system
> > > from big news events that change the character of the markets
> > > overnight, or in a minute during the day. I consider these
things
> > > that produce large quick drawdowns will be captured by a
Maximum
> > > Drawdown metric. The test period needs to have some of these
big
> > > events in it. The event may be too quick to affect a large
> > > statistical function much, giving a false sense of goodness to
> the
> > > system. Or the perturbation might show up in a way that takes a
> > great
> > > system and makes the smoothness number look bad due to a one
time
> > > event. That is the challenge with a single number, so I will
have
> > to
> > > experiment with the right weightings.
> > >
> > > That is why I say that the absolute judgement comes from
> > examination
> > > of the equity curve. The goodness numbers are just for ease of
> > > relative comparisons of automated parameter optimization for
> > candidate
> > > systems. It is also nice to have a number or two as a future
> point
> > of
> > > reference rather than going back over equity curves for every
> > > comparison.
> > >
> > > Perhaps an FFT over the equity curve would generate an
> interesting
> > > signature in the period of the dominant frequency and I also
need
> > the
> > > amplitude. I would have to look into this more, since I have
not
> > > tried this before.
> > >
> > > I will start out simple and see how better numbers compare to
the
> > > curves, then decide where to go from there.
> > >
> > > > (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).
> > >
> > > I am buried in work right now, so I wanted to gauge the value
to
> > > others of some of the things I could post on the UKB. I would
> have
> > to
> > > fight for the time to figure out how to post and fiddle with
with
> > > formatting issues etc. If it were as easy as sending a PDF
email
> > > attachment here, I would have done it a month ago. It is the up
> > front
> > > time investment that is holding me back right now.
> > >
> > > When I get little feedback or interest from a post, I can't
> > prioritize
> > > the time to share more of what I am doing. If I were not so
busy,
> I
> > > would do it anyway, but for now I need powerful justification
to
> > delay
> > > some other important work to make time for it. This is not a
> spare
> > > time hobby for me, because I have no spare time right now. :-(
> > >
> > > I could use a teammate to get me through the initial stages.
> > However,
> > > I see that only a few have ventured as far as posting yet, so
the
> > > field is limited. I do all my content creation on a Mac, and
keep
> > my
> > > virtual PC free of everything but AmiBroker and related support
> > > programs. That is why I prefer to generate PDF content as it
> works
> > > everywhere. And I have exceptionally easy to use and powerful
> tools
> > > for generating them already.
> > >
> > > Best regards,
> > > Dennis Brown
> > >
> > > On Mar 12, 2008, at 7:19 PM, brian_z111 wrote:
> > >
> > > > 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@xxxxxxxxx <mailto:amibroker%
40yahoogroups.com>
> > ps.com,
> > > Dennis Brown <see3d@> 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@>
> > > >>> 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
> > > >>>
> > > >>>
> > > >>>
> > > >>>
> > > >>
> > > >
> > > >
> > > >
> > > >
> > > > 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.amibroke <http://www.amibroke
> > <http://www.amibroker.com/devlog/> r.com/devlog/>
> > r.com/devlog/
> > > >
> > > > For other support material please check also:
> > > > http://www.amibroke <http://www.amibroke
> > <http://www.amibroker.com/support.html> r.com/support.html>
> > > r.com/support.html
> > > >
> > > > Yahoo! Groups Links
> > > >
> > > >
> > > >
> > >
> >
>
------------------------------------
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For other support material please check also:
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