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[amibroker] Re: What's a good k ratio,and thoughts on when k ratio clashes with MDD and Sharpe?


  • Date: Mon, 30 Nov 2009 21:45:57 -0000
  • From: "Mike" <sfclimbers@xxxxxxxxx>
  • Subject: [amibroker] Re: What's a good k ratio,and thoughts on when k ratio clashes with MDD and Sharpe?

PureBytes Links

Trading Reference Links

For a textual description, generate a backtest report and then hover your mouse over any metric name. The tooltip will provide a description of the metric. For most, a mathematical explanation can be found via google.

Mike

--- In amibroker@xxxxxxxxxxxxxxx, "Potato Soup" <potatosoupz@xxx> wrote:
>
> Yes, I still don't have an explanation for what car is. And all the others I listed. 
> 
> -----Original Message-----
> From: Keith McCombs <kmccombs@xxx>
> Date: Mon, 30 Nov 2009 14:05:23 
> To: <amibroker@xxxxxxxxxxxxxxx>
> Subject: Re: [amibroker] What's a good k ratio,
>  and thoughts on when k ratio clashes with MDD and Sharpe?
> 
> One thing that I would find most helpful, as far as performance metrics 
> are concerned, is a precise definition of each metric in "AmiBroker 
> User's Guide" (page 156 for v5.20), including AFL formulas to produce 
> results equivalent to those produced by AB back tester analysis.
> 
> -- Keith
> 
> Howard B wrote:
> >  
> >
> > Hi PS --
> >
> > One way to get a feeling for values for metrics and objective 
> > functions is run an optimization, giving you a range of results.  If 
> > necessary, peek into the future so you are certain to get some really 
> > good results.
> >
> > Look through the list of results, pick some individual results with a 
> > variety of values for the metrics you want to learn about. 
> >
> > Set the default value of the optimized variables to the specific 
> > values you chose.
> >
> > Run a single backtest.  Plot the equity curve.
> >
> > When you have done a few of these and have a feeling for the 
> > characteristics of the systems you would like to trade, print out the 
> > plot of the equity curves and write the values of the metrics and 
> > objective functions on the printout.
> >
> > -----------------------
> >
> > Your question about interpretation.
> >
> > My preference is for objective functions that reward equity growth and 
> > penalize drawdown.  CAR/MDD, RAR/MDD, RRR, Recovery Factor, K-Ratio, 
> > Ulcer Performance Index, and Sharpe Ratio all do that.  In all of 
> > these cases, larger values are better.
> >
> > The important results are the out-of-sample results.  We are looking 
> > for logic and parameter values that not only perform well in-sample, 
> > but that also perform well out-of-sample. 
> >
> > When you run walk forward tests, you will find that some objective 
> > functions give high rank to alternatives that do tend to perform well 
> > out-of-sample, while other objective functions select alternatives 
> > that often do not perform well out-of-sample.  You will need to run 
> > some of your own tests to get a feeling for how these work on your 
> > trading systems. 
> >
> > My experience is that using net profit is usually a poor objective 
> > function, although it is the default (and often the only) selection 
> > for some trading systems development platforms other than AmiBroker. 
> >
> > Fund managers are evaluated on the Sharpe Ratio of their performance.  
> > My experience is that systems selected using Sharpe Ratio tend to 
> > perform poorly out-of-sample.
> >
> > Standard Error is a measurement of the smoothness of the equity line 
> > -- smaller values are better.  But optimizing to minimize standard 
> > error alone may give high ranks to systems that have trading 
> > characteristics that you do not want.  For example, if you have the 
> > options set so that the equity earns interest when ever it is not in a 
> > position, then using standard error will reward alternatives that stay 
> > in cash and trade infrequently.
> >
> > ------------------------
> >
> > One of the very valuable features of AmiBroker is the capability for 
> > the system developer to create whatever objective function he or she 
> > wants to use.  It does not have to be limited to those that are 
> > distributed with AmiBroker and appear in the list of metrics.  You 
> > might want to combine metrics -- for example to reward alternatives 
> > whose trading frequency suits your preferences, while also rewarding 
> > equity growth and penalizing drawdown.
> >
> > Thanks,
> > Howard
> >
> >
> >
> >
> > On Sat, Nov 28, 2009 at 11:33 PM, potatosoupz <potatosoupz@xxx 
> > <mailto:potatosoupz@...>> wrote:
> >
> >      
> >
> >     I don't see any good definitions for the metrics below. I am
> >     familiar of course with Sharpe, and Ulcer Index. I'm finding it a
> >     bit hard to reconcile the differences. How would you reconcile a
> >     backtest that has a max draw down % that is smaller than it's
> >     profit %, a low ulcer index, a high Sharpe, but a very low k ratio
> >     (< .05)?
> >
> >     Ulcer Index in my mind is one of the best metrics outside of a
> >     much deeper quantitative treatment of things. Thoughts?
> >
> >     CAR/MDD ?
> >     RAR/MDD ?
> >     Payoff Ratio ?
> >     Standard Error ?
> >     RRR ?
> >     Recovery Factor ?
> >
> >
> >
>




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