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Joris -
Good find. That quick article was an experiment of sorts. I had seen Bert's original post and sat down while watching Jeopardy and wanted to see if I could do something reasonable that was quick. I spilled over into the next TV show and I didn't get a single Jeopardy puzzle, but I got it done :-)
But seriously, that is one issue that I'm trying to address - how to do a quick overview that can be found in a search or quickly referenced in a post.
-- Bruce
--- In amibroker@xxxxxxxxxxxxxxx, "Joris M.schuller" <jmschuller@xxx> wrote:
>
> http://www.amibrokeru.com/FreeLibrary/FreeArticles/tabid/63/articleType/Arti
> cleView/articleId/96/Leveraged-Funds-and-ETFrsquos-vs-Margined-Investments-n
> dash-Important-Differences.aspx
>
>
>
> From: amibroker@xxxxxxxxxxxxxxx [mailto:amibroker@xxxxxxxxxxxxxxx] On Behalf
> Of bistrader
> Sent: Tuesday, September 22, 2009 10:27 AM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: Quick Question about Max System Drawdown
>
>
>
>
>
> A agree. I assumed that they were in my example. I can, of course, address
> my area of concern with a different example. Let say that one can buy an ETF
> that is leverage 1 and lets say that the return over the period is 20% with
> mdd of -10%. What would the return be with margin at 50%? It would be 50%.
> What will be the mdd? It will be -20%. Without the cost of borrowing
> included.
>
> --- In amibroker@xxxxxxxxxxxxxxx <mailto:amibroker%40yahoogroups.com> ,
> "re_rowland" <rowland@> wrote:
> >
> >
> > Bistrader, that is not how leveraged ETFs work. A 2x ETF is not the same
> as a 1x ETF on 50% margin. Your 1x on 50% margin never rebalances unless you
> get a margin call. Your 2x ETF rebalances EVERY day and the daily
> compounding will produce results very different, sometimes vastly different,
> than twice your 1x ETF.
> >
> > Since they are different animals, AB will not try to tell you they are the
> same. They are the same for approximately one-day. After that, all bets are
> off.
> >
> > I have written many articles on this subject as have others. There is no
> shortage of information on this subject on many investment websites. For
> starters, check the websites of the 2x ETF providers.
> >
> > --- In amibroker@xxxxxxxxxxxxxxx <mailto:amibroker%40yahoogroups.com> ,
> "bistrader" <bistrader@> wrote:
> > >
> > > My point? Sorry.
> > >
> > > My point is that it would be nice if AB provided the same return and mdd
> for my leverage 2 ETF and my leverage 1 ETF with 50% margin. That is, both
> would have return of 30% and mdd of 10%.
> > >
> > > That is my only comment. There will be others that do not agree and that
> is fine. It it just what I would like to see. :)
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx <mailto:amibroker%40yahoogroups.com> ,
> Mark Hike <markhike@> wrote:
> > > >
> > > > What's your point?
> > > >
> > > > DD = (Equity-PeakEqity)/PeakEquity;
> > > >
> > > > I don't see any leverage or margin in the formula.
> > > > If you are talking about theoretical DD of a system without leverage
> and
> > > > actual DD of an account. There is some relationship between these two
> DDs
> > > > which has something to do with leverage. But the original question is
> about
> > > > MDD in backtest account.
> > > >
> > > >
> > > > On Thu, Sep 17, 2009 at 12:06 PM, bistrader <bistrader@> wrote:
> > > >
> > > > >
> > > > >
> > > > > Hmmm...
> > > > >
> > > > > Lets say that you have 2 ETFs, one with leverage 1 and the other
> with
> > > > > leverage 2. Lets also assume that these are perfect ETFs, implying
> that the
> > > > > only difference between them is the leverage. Now, look at the
> return and
> > > > > mdd for the one with leverage 1 and lets assume that it is 15%
> return with
> > > > > 5% mdd over a period. What will the stats be for the ETF with
> leverage 2? It
> > > > > will be 30% and with 10% mdd. In AmiBroker and elsewhere.
> > > > >
> > > > > Lets assume that the leverage 2 ETF is no longer available but you
> still
> > > > > want to invest with leverage of 2. You still can with leverage 1 ETF
> with
> > > > > 50% margin, providing an implied leverage of 2. What would the
> return and
> > > > > mdd be when you look at your brokerage statement numbers? If will be
> 30%
> > > > > return with 10% mdd.
> > > > >
> > > > > ...
> > > > >
> > > > >
> > > > > --- In amibroker@xxxxxxxxxxxxxxx
> <mailto:amibroker%40yahoogroups.com> <amibroker%40yahoogroups.com>, Mark
> Hike
> > > > > <markhike@> wrote:
> > > > > >
> > > > > > DrawDown has nothing to do with your margin, it is the percentage
> drop
> > > > > from
> > > > > > peak equity.
> > > > > > Margin controls how much you can trade.
> > > > > >
> > > > > > On Wed, Sep 16, 2009 at 5:02 PM, Brandon_Ridenour <
> > > > > > brandon_ridenour@> wrote:
> > > > > >
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > Hi All,
> > > > > > >
> > > > > > > A quick simple question about Max System Drawdown -- if I am
> using
> > > > > margin
> > > > > > > in the backtest (for example, set to 50), does the max drawdown
> only
> > > > > reflect
> > > > > > > my % loss of equity? Or is it loss of portfolio value?
> > > > > > >
> > > > > > > For example, if i were setting margin to 50, and MDD reached
> 50%, I
> > > > > would
> > > > > > > be at risk of a total wipeout. If, on the other hand, MDD only
> > > > > represents a
> > > > > > > loss of personal equity, it wouldn't be as big a deal.
> > > > > > >
> > > > > > > Thanks!
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > >
> > > > >
> > > > >
> > > > >
> > > >
> > >
> >
>
>
>
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