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[amibroker] Re: Perfect Profit and DOF



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Trading Reference Links

I didnt see the Degree of freedom question
Suppose we have one rule set buy = c > ema(c, pds);
we put this through our dataset of 200 symbols each with 2000 bars
So there is 200 * 2000 = 400000 Dof in terms of the Closing price. 
Note that Dof in h, l, o and volume is irrelevant because we dont use 
them.
if pds is a single no. then we have used up only 1 dof, but if 
pds = optimize("pds", 30, 10, 100, 1);
then we effectively have 91 rules, just that we only choose one of 
them after looking at the results of 91 rules. 
So I believe the Used dof is the no of possible permutations 
expressed in your optimization statement + other fixed rules, implied 
or otherwise.
Hope that helps
/Paul.
--- In amibroker@xxxxxxxxxxxxxxx, Thomas Ludwig <Thomas.Ludwig@xxx> 
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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