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Herman,
I agree that it's necessary to visually inspect the equity curve. And by
adding these lines to your Portfolio.afl ...
RelPerf=eq/C;
if(ParamToggle("Show Rel.Perf Equity", "No|Yes",0))
Plot(RelPerf, "Rel.Perf.", colorBlack,styleThick|styleOwnScale);
... it's easy to recognize in which market situations your system
outperforms (RelPerf rising) or underperforms (RelPerf falling) the
tested ticker.
On the other hand, the equity line is affected by bad data as well. Just
by inspecting the equity curve you would not necessarily recognize
these problems.
Best regards,
Thomas
> If your system is simple (as, imo, it ought to be) the best statistic
> for straightness of equity curve might be your eyeball.
>
> Too often i have found that statistics are thrown off by bad data,
> splits, data holes, etc. There is no DataBasePure() function and no
> one can ever know for sure if their data is correct. So, the prudent
> trader would visually inspect the equity curve in any case to confirm
> that the statistics are correct. Why not spend a little time and
> write some code (or do a search) that cycles through the equity
> curves? Watching a slide show of equity curves will teach you things
> about your system.
>
> best regards,
> herman
>
>
>
>
>
> For tips on developing Real-Time Auto-Trading systems visit:
> http://www.amibroker.org/userkb/
>
> Friday, March 14, 2008, 12:59:14 AM, you wrote:
> > Dennis,
> >
> > You are explaining some nuances of evaluation that I haven't
> > considered before - I have to think it over (there is a lot of
> > content in this thread so that applies to some of the other posts
> > as well).
> >
> >> PS. AmiBroker is a Godsend to many, because it lets them test out
> >>a
> >> bunch of bad ideas without losing all their money finding out the
> >> truth. That is also one of the reasons I like to program all
> >> the trading aspects of my systems myself. If I just use a black
> >> box, I do
> >> not really internalize the trading details that are so important
> >
> > to
> >
> >> know when real trading starts up. It must become second nature in
> >> understanding for me.
> >
> > 100% agree there - thats why I did my own thing on evaluation and
> > then parked it - I took ownership of the ideas I needed and didn't
> > feel the need to write it up for a journal.
> >
> > As before - I am not going to ignore what you are teasing out for
> > me to see - I'm not getting it yet but I will when I cellotape all
> > of your posts together.
> >
> > thanks for taking the time out to explain your take.
> >
> > brian_z
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, Dennis Brown <see3d@xxx> wrote:
> >> Brian,
> >>
> >> Right! when multiplied by the Ave% Win and Loss, the product
> >
> > comes
> >
> >> out to be a narrow range (for an otherwise optimized system). The
> >> higher Win% systems have a longer trade frequency, thus larger
> >
> > wins
> >
> >> and drawdowns. I look in the 10 to 30 minute average time per
> >
> > trade.
> >
> >> The world of trading has an infinite number of possibilities.
> >> However, I am a simple minded person, so I have to simplify my
> >
> > range
> >
> >> of options to be successful. KISS is my motto.
> >>
> >> I can also succumb to analysis paralysis very easily, so I have to
> >> apply my other motto to myself routinely: Time to shoot the
> >
> > engineers
> >
> >> and put it into production.
> >>
> >> ~Dennis
> >>
> >> PS. AmiBroker is a Godsend to many, because it lets them test out
> >
> > a
> >
> >> bunch of bad ideas without losing all their money finding out the
> >> truth. That is also one of the reasons I like to program all
> >> the trading aspects of my systems myself. If I just use a black
> >> box, I
> >
> > do
> >
> >> not really internalize the trading details that are so important
> >
> > to
> >
> >> know when real trading starts up. It must become second nature in
> >> understanding for me.
> >>
> >> On Mar 13, 2008, at 9:49 PM, brian_z111 wrote:
> >> >> However, the best systems are in the 45% to 55% range so far.
> >
> > What
> >
> >> >> does that tell you?
> >> >
> >> > I think you will understand that I have to act from my current
> >
> > biases
> >
> >> > but that I am also capable of change - keeping that in mind.
> >> >
> >> > It is meaningless without the frequency distribution of the
> >> > sample (it doesn't have to be a normal dist, since the central
> >> > limit
> >
> > theorem
> >
> >> > predicts it will move towards normal behaviour anyway) i.e. W/L
> >> > without ave%w/ave%L doesn't tell us as much about outcomes as
> >> > it
> >
> > does
> >
> >> > when combined, let alone simulated.
> >> >
> >> > brian_z
> >> >
> >> > --- In amibroker@xxxxxxxxxxxxxxx, Dennis Brown <see3d@> wrote:
> >> >> Paul,
> >> >>
> >> >> Like you said, I always assume that if I start trading a new
> >> >
> >> > system
> >> >
> >> >> that the first thing I will experience is the worst case
> >> >> drawdown
> >> >
> >> > that
> >> >
> >> >> will shake my confidence in it. I have to ask myself how I
> >> >> would
> >> >
> >> > feel
> >> >
> >> >> after a few days of this, and would I continue, or start to
> >> >
> >> > question
> >> >
> >> >> my system development methods and drop out just when the system
> >> >
> >> > turns
> >> >
> >> >> around. This psychology happens to traders and investors all
> >> >> the time, and is one of the main causes of losses.
> >> >>
> >> >> Brian,
> >> >>
> >> >> I have put together a lot of systems recently, looking for the
> >> >
> >> > most
> >> >
> >> >> robust ones. I have profitable systems with a Win% ranging
> >> >> from
> >> >
> >> > 30%
> >> >
> >> >> to 80%. The higher the Win%, the larger the drawdowns. No
> >> >> free lunch. However, the best systems are in the 45% to 55%
> >> >> range so
> >> >
> >> > far.
> >> >
> >> >> What does that tell you?
> >> >>
> >> >> Best regards,
> >> >> Dennis
> >> >>
> >> >> On Mar 13, 2008, at 8:27 PM, Paul Ho 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@xxxxxxxxxxxxxxx, "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@xxxxxxxxxxxxxxx
> >> >
> >> > [mailto:amibroker@xxxxxxxxxxxxxxx]
> >> >
> >> >>> On Behalf
> >> >>>
> >> >>>> Of Dennis Brown
> >> >>>> Sent: Friday, 14 March 2008 4:46 AM
> >> >>>> To: amibroker@xxxxxxxxxxxxxxx
> >> >>>> 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@xxxxxxxxxxxxxxx>
> >> >
> >> > ps.com
> >> >
> >> >>>> [mailto:amibroker@xxxxxxxxx
> >> >>>> <mailto:amibroker@xxxxxxxxxxxxxxx>
> >> >>>
> >> >>> ps.com] On
> >> >>>
> >> >>>> Behalf OfDennis Brown
> >> >>>> Sent: Thursday, 13 March 2008 12:24 PM
> >> >>>> To: amibroker@xxxxxxxxx <mailto:amibroker@xxxxxxxxxxxxxxx>
> >> >
> >> > 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.amibroker.com/devlog/>
> >> >>>
> >> >>> r.com/devlog/
> >> >>>
> >> >>>>> For other support material please check also:
> >> >>>>> http://www.amibroke ;<http://www.amibroker.com/support.html>
> >> >>>>
> >> >>>> r.com/support.html
> >> >>>>
> >> >>>>> Yahoo! Groups Links
> >> >
> >> > ------------------------------------
> >> >
> >> > 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
> >
> > ------------------------------------
> >
> > 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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