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Hi Mike,
I'll post it tonight with an example of how to drive it...
To set expectations, I am not convinced that it performs any better
than car/mdd or upi. So, I dont want to promote as the ultimate
performance metric. Just an experiment. I did get some good results
with simple systems.
-Doug
--- In amibroker@xxxxxxxxxxxxxxx, "Mike" <sfclimbers@xxx> wrote:
>
> Hi,
>
> Did you end up posting that DLL (or its source) anywhere? I didn't
> notice it go by. I don't receive attachments as part of these
posts,
> but I looked in the messaging archive at purebytes and did not see
> any attachment there either.
>
> Thanks.
>
> Mike
>
> --- In amibroker@xxxxxxxxxxxxxxx, "dloyer123" <dloyer123@> wrote:
> >
> > Thanks for the great response.
> >
> > With so many options available, I like the idea of have a "best"
> > solution with some logical or at least empirical reasoning.
> >
> > I am doing some walkforward testing now with UPI, to see how it
> works.
> >
> > So far, Car/Mdd and Pessimistic Car/Mdd seem to have good results
> in
> > the walk forward testing. k-ratio was disappointing.
> >
> > Mdd does have a "long tail" on the positive side, like a bell
curve
> > with one end pulled out. The car distribution is much
> > more "normal".
> >
> > Great link to Howards's slides. I enjoyed his book and look
> forward
> > to the enxt one.
> >
> > I dont mind sharing the dll for Pesimistic Car/Mdd. There are
also
> > some performance hacks to speed up DayOfWeek(), RoundPenny() and
> > IsOptionsWeek() that togeher, shaved 20% of the execution time
off
> my
> > system.
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Mike" <sfclimbers@> wrote:
> > >
> > > Hi,
> > >
> > > I think that the answer that you are most likely to hear is
that
> > > there is no 'best' fitness function, since no two traders are
> > exactly
> > > alike, and the function has to suit the trader.
> > >
> > > However, generalizations can be made with regards to
> > characteristics
> > > that some fitness functions appear to posess. For example; K-
> Ratio
> > > and UPI tend to have a smooth steady slope.
> > >
> > > ***
> > >
> > > Currently, I have been striving to minimize the size, and more
> > > importantly to me - the duration, of a drawdown. As such, I
find
> > that
> > > UPI serves as a good base. A nice description written by Peter
> > > Martin, the creator of the Ulcer Index and UPI (also known as
> > Martin
> > > Ratio), can be found here: http://www.tangotools.com/ui/ui.htm
> > >
> > > I combine UPI with filters unique to my needs (with regards to
> > > holding periods and number of trades). For exmaple, I deduct
from
> > the
> > > UPI on a sliding scale when there are too few trades or when
> trades
> > > are on average held too long. I produce a custom metric, using
> > custom
> > > backtester code, which I then use as the fitness function for
> walk
> > > forward.
> > >
> > > ***
> > >
> > > Howard Bandy regularly cites CAR/MDD, RAR/MDD, RRR, Ulcer
> > Performance
> > > Index, and K-Ratio as strong starting points from which to form
> > your
> > > personalized metric. He gave a nice example in his Las Vegas
> > workshop
> > > (slides for a similar workshop can be found in this post:
> > >
http://finance.groups.yahoo.com/group/amibroker/message/123602 )
> > > where he outlined a custom metric based on the following
criteria:
> > >
> > > "My goal is to make a 15% annual profit trading common stocks,
> > > control drawdowns, cherry-pick trades, hold about one week, and
> be
> > > tradable without interfering with my day job."
> > >
> > > Howard also offered a suggestion for evaluating your fitness
> > function
> > > by running several different functions against the same data,
> > > printing out the graphs, and then eyeballing the equity curves
to
> > see
> > > which one was most appealing to you. In practice you may be
> > surprised
> > > at what ultimately appeals to you.
> > >
> > > ***
> > >
> > > In his most recent book (The Evaluation and Optimization of
> Trading
> > > Strategies), Robert Pardo offers up a suggested metric that he
> > calls
> > > PROM (Pessimistic return on margin) which is very much like
what
> > you
> > > are describing in that he adjusts downwards the number of
winning
> > > trades (by the square root of the number of winners) before
> > > multiplying by the average win. Similarly, he adjusts upwards
(by
> > the
> > > square root) the number of losing trades before multiplying by
> the
> > > average loss. Using this adjusted gross return, he then
> calculates
> > > the annualized rate of return over margin (assuming futures
> > trading).
> > >
> > > Pardo also advocates measuring performance against perfect
profit
> > > where perfect profit is defined as the sum total of all of the
> > > potential profit that could be realized by buying every bottom
> and
> > > selling every top. He refers to the ratio of Net Profit/Perfect
> > > Profit as "model efficiency".
> > >
> > > ***
> > >
> > > In direct contrast to many of the measures above, Ralph Vince
> (The
> > > Handbook of Portfolio Mathematics) belittles any calculation
> using
> > > MDD as being delusional. 50 tosses of a fair coin can and will
> > result
> > > in 50 straight losses from time to time. Does that imply that
the
> > > probabilities have changed at all just because your backtesting
> > only
> > > saw 25 losing tosses earlier?
> > >
> > > He states that two systems are best compared by determining
their
> > > geometric means as calculated at their "optimal f", and the
> > > comparrison of the optimal f itself, on a two dimensional scale
> > such
> > > that the higher geometric mean with the lower optimal f is the
> > better
> > > system.
> > >
> > > I haven't finished this book yet, but he introduces a revised
> > > approach later which addresses the very real problem of optimal
f
> > in
> > > that the drawdowns can be severe, thereby precluding most
traders
> > > from following through on the principle.
> > >
> > > ***
> > >
> > > Your DLL sounds appealing. Would you be willing to share it
with
> > > others?
> > >
> > > Mike
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "dloyer123" <dloyer123@>
wrote:
> > > >
> > > > Has anyone done quantitative testing to pick the best fitness
> > > > function?
> > > >
> > > > Car/mdd seems to work well, better than k-ratio or sharpe in
my
> > > > personal testing.
> > > >
> > > > Haven't tried Ulcer performance index.
> > > >
> > > > I just woundered what others have found.
> > > >
> > > > Since the fitness function has such a major impact on the
> system
> > > that
> > > > results, it seems that a good fitness function should help
the
> > > system
> > > > perform well in walk forward testing. This could be measured
> by
> > > walk
> > > > forward testing the same system with different fitness
> functions
> > > and
> > > > comparing how they do in the out of sample data.
> > > >
> > > > I have been experimenting with a new fitness function I
> > > > call "pessimistic car/mdd". It uses a dll to resample the
> trade
> > > list
> > > > after each run 10,000 times, similar to a bootstrap method.
It
> > > finds
> > > > the histogram of the resampled car and mdd values, then
> > calculates
> > > > car/mdd based on average car - 1 stdev and mdd + 1 stdev.
> > > >
> > > > The goal of this fitness function is to minimize the impact
of
> > data
> > > > mining.
> > > >
> > >
> >
>
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