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Thankyou Tom,
What settings do you have for the AA Account Margin i.e. what is your leverage?
Re Metrics.
Generally, with metrics, we have three things to consider:
- mathematical integrity e.g. 1 + 1 == 2 and not 3;
- what aspect of the real world is it modeling i.e. what information does it convey or what insight does it provide to us e.g. we can add 1/2 and 1/2 == 1 which models the real world behaviour of an apple cut in half;
- is that information of any value to us e.g. are we selling apples?
WRT AB's metrics:
- they all have mathematical integrity (designed by maths/programmers and implemented in AB by a maths/programmer),
- they don't all provide us with any useful information ... the designers all thought they were doinh that but sometimes the mathematicians can't see the wood for the trees, so they missed their mark,
- I don't value any of them (personal choice) so I don't use any of them, except for the Win/Loss ratio (I don't value them because I want the information they convey to be precise ... I think they all missed their mark .... or I can't see the import in what they were interested in ... or I want to watch something that they aren't watching ... something that others haven't published before).
For example:
K-Ratio - was designed by an industry insider, with a predilection for Quantitative Analysis and educating traders.
He designed it as a response to his view that the Sharpe Ratio (popular with Funds) wasn't modeling reward and risk they way he thought it should (it wasn't telling him wanted he wanted to know or he thought the idea behind the model was invalid).
After he published the first time he found that his ratio lacked mathematical integrity (he was alerted by a trader who read his work) and so he published version 2, with a new recommended level (down from 1 to 0.5).
The K-ratio is designed to report on inconsistent returns ... Kestner, the designer, wanted consistency so his ratio is high when returns are consistent and low when they are inconsistent.
(habitually we think high is good so he went with that).
You are trading for returns (CAR) and you don't want Drawdown, so the metric that reports on the things you value (CAR/MDD) is up, while the metric that reports on the things that Kestner values is down.
If you want to think about whether you should be placing a value on consistent returns then you can consider K-ratio or others that do a similar job.
I am not naturally a team player so I tend not to trust others work and so I do all of my own checking etc ... so if I was going to look into consistency of returns I would start by:
- finding which metrics purport to do this job
- check them for maths integrity
- check to see if AB implements them as per the original
- think about whether the idea behind them is going to measure something that means something to me and if they actually captured that information
- if I am not happy at any stage of the above I will either not use them OR add a custom metric to AB.
Kestner wasn't necessarily correct and even if he was does his measure report well in 'inconsistent returns' or not?
I haven't gone into all of that but IMO volatilty of returns is not necessarily bad ... if big wins outweigh big losses then big returns will follow (exactly as per your performance record).
Re tolerance for risk:
Risking our accounts is an occupational hazard, if we are young or not well off and we only have a small account ... accepting higher risk can get us up from an account, that is really too small to trade with professionally, to a size where we can consider ourselves professional ... as we approach that point we probably should back off the risky behaviour a bit.
In other words ... many young people throw all caution to the wind when they start because they have nothing to lose ... if they get away with it well and good.
--- In amibroker@xxxxxxxxxxxxxxx, "professor77747" <professor@xxx> wrote:
>
> Brian,
>
> I trade 4 times a day using 6 hour bars. I have a trading period of about 30 seconds during which a trade is made at the close of the bar.
>
> I trade gold future contracts. I trade one contract now which is 100 ounces of gold. Gold has swings of $10 to $20 during one bar. Once I saw a swing of $50 in one bar.
>
> So on one contract, I have been up $1500 and during the next bar, I will be down $500.
>
> Tom
>
> --- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@> wrote:
> >
> > I am curious about your post.
> >
> > You know how to calculate the metrics included with AB but you don't understand them?
> >
> > In spite of that you managed to return approx 320% in a year?
> >
> > You system has the most important metric working for you ... you have the money in the bank.
> > On top of that you did it in a bear year and achieved good results long and short (as we would expect the shorts outperform the longs).
> >
> > And now you are repeating the effort this year.
> > You don't appear to be a trading novice ... not on those results.
> >
> > However, you didn't answer my first questions so I am left guessing and now I have some more questions:
> >
> > - you say it is one year trading but total trades are 84 * ave 6.88 bars per trade ... so if that is daily bars then that is more than a year.... or are you intraday trading?
> >
> > - according to exposure you are only in the market 0.11% of the time yet the market is volatile enough to hand over trades with an average win of approx 2000% in 7.61 bars (on ave) ... which market is giving you swings of 2000% every 7-8 bars?
> >
> > - I don't understand how you can have max consecutive losers == 5 and ave loss == 1200% approx and have a max drawdown of around 20% ... on e loss alone is greater than the drawdown.
> >
> > Did I understand you correctly ... this is how your system backtests and trades?
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "professor77747" <professor@> wrote:
> > >
> > > Thank you for your replies. However, I have the way they are calculated, but I don't know what they mean. For instance, CAR/MaxDD is good if bigger than 2. My formula is over 12. Is that good?
> > >
> > > However, the K-Ratio should be over 1.0. My forumula is .06. So that must be bad.
> > >
> > > I don't know how to judge my formula because I really don't understand how to interpret the figures.
> > >
> > > What should the Ulcer Index be. Is higher better or worse.
> > >
> > > I have just compared my formulas using Profit and Downdraw. I take the highest profit as long as the downdraw is close.
> > >
> > > Tom
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "Mike" <sfclimbers@> wrote:
> > > >
> > > > http://www.amibroker.com/guide/h_report.html
> > > > http://www.investopedia.com/categories/formulas.asp
> > > >
> > > > Mike
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, "professor77747" <professor@> wrote:
> > > > >
> > > > >
> > > > > I have a very profitable formual that I have been autotrading for over a
> > > > > year. However, it is also risky. I have another formula that is not as
> > > > > profitable, but is also not as risky. My formula trade almost exactly as
> > > > > a backtest except for the price which varies by so little that it is not
> > > > > a factor.
> > > > >
> > > > > I don't understand any of the risk % factors in the top section and the
> > > > > factors below the drawdown figures in the bottom section.
> > > > >
> > > > > Here is a link to the statistics for last year which are very similar to
> > > > > this year except that there is more data. Statistics
> > > > > <http://success101.biz/Backtest%20Report.htm>
> > > > >
> > > > > Please help me understand these statistics. Thanks
> > > > >
> > > > > Tom
> > > > >
> > > >
> > >
> >
>
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