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Thomas
I think the model efficency can be calculated in the CBT without
directly getting PP, This can be done by obtaining the Theoretical
buy point (tbp) around the actual buy point, and obtaining tsp around
the sell point.
The tbp can happen either before or just after the buy point.
first look at the before scenario, you can either use trough or LLV
function. the problem with the trough function is that the low
obtained from Trough() could be quite far away. Lets say we use LLV
(L, pds) where pds is half the average bars held obtained directly
from CBT metrics
so tbp_before = LLV(L, bars/2)
To find tbp_after we can use the mae metrics from backtest directly
tbp_after = (1 + mae)*buyprice;
tbp = min(tbp_before, tbp_after);
The cbt code for tbp could be as follows:
....
bo = GetBacktesterObject();
bo.Backtest();
st.bo.GetPerformanceStats(0);
bars = st.GetValue("AllavgBarsHeld");
me = 0; //stores the sum of model eff per trade
for( trade = bo.GetFirstTrade(); trade; trade = bo.GetNextTrade() )
{
sym = trade.Symbol;
mae = trade.GetMAE();
lp = foregin(sym, "L");
tbp_before = lastvalue(valuewhen(datetime()== trade.EntryDateTime,
LLV(lp,bars/2)));
tbp_after = (1+mae)*trade.EntryPrice;
tbp = min(tbp_before, tbp_after);
........
tsp = max(tsp_before, tsp_after);
theoreticProfitratio = tsp/tbp;
realprofitratio = trade.ExitPrice/trade.EntryPrice;
me += realprofitratio/theoreticProfitratio;
}
.... // do the same with open position
mean_me = me/st.GetValue("AllQty");
There are a number of variations depending on your perference
1. You can use trough and peak instead of LLV and HHV
2. instead of average ME, you can go for accumulated ME by dividing
real profit / theoretical profit. Not sure the figure would be too
small to make a lot of sense.
3. you can use geometric average instead of arithmetic average
Now a few questions to both Thomas and Dennis
What kind of insights can one obtain with this comparsion? and How do
you intend to use it? And would you mind post some of your findings?
Cheers
Paul.
--- In amibroker@xxxxxxxxxxxxxxx, Dennis Brown <see3d@xxx> wrote:
>
> Thomas,
>
> That is what I do. Though I also add all the trading overhead as
if
> it were real trades, then adjust the % change to the maximum total
> profit which gives you a lot more insights.
>
> BR,
> Dennis
>
> On May 16, 2008, at 1:35 PM, Thomas Ludwig wrote:
>
> > Hi all,
> >
> > Rober Pardo suggests in his book "The Evaluation and Optimization
of
> > Trading Strategies" the calculation of "Perfect Profit" (PP)
which "is
> > the sum total of all of the potential profit that could be
realized by
> > buying every bottom and selling every top". By comparing Net
Profit of
> > your trading system with PP you can calculate the "Model
Efficiency"
> > (ME).
> >
> > I think PP can be easily calculated as a stand-alone code by
> > applying a,
> > say, 1% Zigzag. But how can it be done if I want to add ME as an
> > additional metric in the Custom Backtester? The Equity() function
is
> > used for your trading system and cannot be used for the Zigzag
system
> > at the same time in order to compare both, IMHO. So the only
> > solution I
> > can think of is to loop through all Zigzag signals and calculate
the
> > profit programmatically. Or am I overlooking something?
> >
> > Pardo also suggests to calculate the Remaining Percentage of
Degrees
> > of
> > Freedom (through Used Dgrees of Freedom and Original Degrees of
> > Freedom). Any idea if and how they can be counted in AFL?
> >
> > Regards,
> >
> > Thomas
> >
> > ------------------------------------
> >
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> >
> >
>
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