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Well Howard as you can see from my comments - I'm a fan of yours. I'm the guy that bought TWO copies of your book! The second copy was for a gift.
While I have a technical/engineering (MS Physical Chemistry) background I had to struggle to understand parts of your lecture - which is a GOOD THING - I actually learned things. I felt the lectures were just not for beginners.
ReefBreak
--- In amibroker@xxxxxxxxxxxxxxx, Howard B <howardbandy@xxx> wrote:
>
> "Industrial Strength"
>
> Is that a good thing or a bad thing?
>
> Thanks,
> Howard
>
>
> On Tue, Feb 9, 2010 at 9:00 PM, reefbreak_sd <reefbreak_sd@xxx> wrote:
>
> >
> >
> > I am no expert in backtesting, you need to address those questions to
> > Howard Bandy on this forum or buy his EXCELLENT book "Quantitative Trading
> > Systems" where he creates and backtests a variety of trading sysstems along
> > with commentary. I understand Howard is coming out with an advanced version
> > very soon. Also he has available a recording of a lecture he gave in
> > Australia detailing the development and backtesting of a trading system. The
> > cost is a trivial $1.95, but beware the lecture is "industrial strength".
> >
> > You can limit the dollar size of each position and limit the number of
> > positions you can hold, thereby removing the total dollars in the account as
> > a determinant of profit.
> >
> > Also note that there is several different levels of running the backtester.
> > Allowing a very high level of control over what it does - This comes at a
> > cost of complexity of programming.
> >
> > You can add custom written calculations to the backtest report.
> >
> > Reef
> >
> > PS
> > I personally feel that backtesting is a "hall of mirrors" where you can
> > easily fool yourself into thinking that you have a profitable system when
> > you don't. Or conversely - needlessly discard a workable system because of
> > poor backtest results. Be VERY skeptical of any results either good or bad.
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx <amibroker%40yahoogroups.com>, Ted Byers
> > <r.ted.byers@> wrote:
> > >
> > > Thanks. That helped a lot.
> > >
> > > However, I am not especially happy with the following:
> > >
> > > System test report window
> >
> > >
> > > correctly_annualized_perc_return = 100% * ( (final_value/initial_value) ^
> > (
> > > 365 / days_in_test ) - 1 )
> > >
> > > where x^y means rising x to the power of y
> > >
> > >
> > > The problem I find lays in knowing precisely what initial_value is
> > supposed
> > > to be. Yes, the formula is correct, and makes sense, if the initial value
> > > is fully utilized in the investment (such as the initial and final value
> > of
> > > a house one has purchased). However, in the system I am working on, at no
> > > point does the total value of all open positions exceed $100,000, and yet
> > I
> > > have been instructed to set, as a default for backtesting purposes,
> > initial
> > > cash at 1,000,000 (the trader we're working with doesn't want to deal
> > with
> > > any limits posed by the available cash). But that means I can arbitrarily
> > > improve the rate of return by a factor of ten if I use an initial value
> > of
> > > 100,000 or arbitrarily make it worse by using an initial value of
> > > 2,000,000. Obviously, I can't use an initial value less than 100,000 or
> > the
> > > trades the system recommends would not be possible, but apart from that
> > > constraint, that I can arbitrarily alter initial value without affecting
> > > total return seems to make this figure just so much meaningless BS. At no
> > > time, when using this code, is position size computed from the available
> > > cash.
> > >
> > > How, then, can I define things in such a way that ensures that the rate
> > of
> > > return actually has a meaningful value? So far, it seems I can only
> > compute
> > > a meaningful value for the rate of return for a specific trade (where the
> > > initial value is obviously the cost of buying the shares, for a long
> > > position, or the value received from the sale of shares, for a short
> > > position), but not for a collection of trades distributed over a period
> > of
> > > several years. Is there a standard way for handling this? One that is
> > > demonstrably valid?
> > >
> > >
> > > Thanks
> > >
> > >
> > > Ted
> > >
> > >
> > > On Mon, Feb 8, 2010 at 4:11 PM, reefbreak_sd <reefbreak_sd@> wrote:
> > >
> > > >
> > > >
> > > > In AB, click on HELP -> SEARCH
> > > > type in "BackTester Report" in the search window
> > > > Under the "Select Topic" that comes back, click on "System Test Report
> > > > Window" and you will see a definition of each term. Many of these are
> > > > industry standard metrics of performance.
> > > >
> > > > You can go to www.investopedia.com and type in for example "risk
> > adjusted
> > > > return" and get a more detailed explaination of most of the report
> > items.
> > > >
> > > > Reef
> > > >
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx <amibroker%40yahoogroups.com><amibroker%
> > 40yahoogroups.com>, Ted Byers
> >
> > > > <r.ted.byers@> wrote:
> > > > >
> > > > > Hi All,
> > > > >
> > > > >
> > > > > I am digging into how AmiBroker computes the various statistics it
> > > > reports
> > > > > on a given back test.
> > > > >
> > > > > For example, I see the following reported:
> > > > >
> > > > > Exposure %
> > > > > Net Risk Adjusted Return %
> > > > > Annual Return %
> > > > > Risk Adjusted Return %
> > > > >
> > > > > Where will I find the details of exactly how AmiBroker computes these
> > > > from a
> > > > > given suite of trades? Now, I know what a risk adjusted return is,
> > but in
> > > > > my previous work, it is based on 100% of the cash being invested, and
> > it
> > > > > carries a specific definition of "risk". In the system I am working
> > with
> > > > > now, it is rare for 100% of the available cash to be invested, and a
> > > > really
> > > > > really long lived trade lasts only a couple weeks (though 9 out of 10
> > > > trades
> > > > > were profitable in my last back test using my own C++ code - which in
> > my
> > > > > view was quite bad - average position size of about 50,000 and total
> > > > profit
> > > > > over 2 years being about 10,000). It seems rather meaningless to
> > report
> > > > an
> > > > > annual rate of return if one is in the market for less than a month.
> > > > >
> > > > > In this "system", the position size is not a function of the total
> > amount
> > > > of
> > > > > cash available; so if these rates are defined relative to the total
> > > > amount
> > > > > of cash available, I can arbitrarily change these rates by increasing
> > or
> > > > > decreasing the amount of cash available, within limits. I am afraid
> > my
> > > > > understanding of these ideas is derived from the perspective of an
> > > > investor
> > > > > (where one buys a stock, and looks at returns based on the
> > combination of
> > > > > dividends and long term change in share value, adjusted for splits,
> > &c.).
> > > > > If I can see how AmiBroker computes these stats for a given backtest,
> > I
> > > > hope
> > > > > to understand these from the perspective of a trader.
> > > > >
> > > > > So where will I find the documentation of how AmiBroker computes
> > these
> > > > back
> > > > > test statistics?
> > > > >
> > > > > Thanks
> > > > >
> > > > > Ted
> > > > >
> > > >
> > > >
> > > >
> > >
> > >
> > >
> > > --
> > > R.E.(Ted) Byers, Ph.D.,Ed.D.
> > > TED@
> >
> > > CTO
> > > Merchant Services Corp.
> > > 350 Harry Walker Parkway North, Suite 8
> > > Newmarket, Ontario
> > > L3Y 8L3
> > >
> >
> >
> >
>
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