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Bob:
Is there a TreadStation code for Sharpe Ratio?
Julian
--- Bob Fulks <bfulks@xxxxxxxxxxxx> wrote:
> At 9:31 AM -0600 1/6/02, Ernie Bonugli wrote:
>
> >
> >So should the scale be read as follows:
> >
> >< 2 - start on another idea, discard this one
> >2-3 - maybe or "shows potential", if the idea is
> its primitive form, ie no tweaking.
> >4-5 - ok, may be production worthy, but keep an
> eye I on it,
> >5-10 - good, you can rest now!
> >
> >This scale probably shows my bias and state of
> affairs.
>
>
> You seem to be confusing Sharpe Ratio and what I
> call "tradeability".
>
> The Sharpe Ratio is an absolute measure of the worth
> of any
> investment. It is basically a reward-to-risk ratio.
> Go to the
> MorningStar web site and you will see that there are
> only about 25
> funds with a Sharpe Ratio of 1.5 or higher. Still
> lots of people
> invest in other funds. MorningStar says a Sharpe
> Ratio of 1.0 is
> "pretty good" for a passive investment.
>
> A trader who trades full time needs to factor in the
> worth of his
> time. It would be pretty dumb to spend all your time
> trading and
> still make less than you could get in a passive
> investment.
>
> Tradeability is altogether different. I have seen
> lots of systems
> that have high Sharpe Ratios that I could never
> trade. The famous
> OddBall is one of them. It has a pretty good Sharpe
> Ratio but gets
> into some pretty bad trades. Sitting in front of a
> screen watching a
> system lose a thousand dollars a minute would drive
> me batty. Others
> may not mind it at all. I suppose if I could have a
> money manager
> trade it and just see monthly statements it would be
> OK. Mark Brown
> said his wife trades it for him (but he was probably
> joking...)
>
> I also do not like systems that require me to sit in
> front of a tube
> all day doing nothing until the point when you have
> to do something
> very quickly. Someone said it is like sailing -
> hours of boredom
> punctuated by moments of shear terror...
>
> Daily bar systems tend to be easy to trade. You run
> the code at
> night, enter orders for the next day, then the next
> night see what
> happened.
>
> Really short-term scalping systems tend to be easy
> to trade. You are
> in the trade a few minutes on high alert then out.
> You can break for
> lunch or run an errand without worrying.
>
> Daytrading system make it easier to sleep at night.
> You can never
> tell when some nut is going to create havoc
> somewhere in the world
> in the middle of the night, especially now days.
>
> Sitting through many weeks of no-profit is also very
> hard. You start
> wondering if the system has stopped working and
> start fiddling with
> it.
>
> I once designed automatic test systems that took
> several hours to run
> but required an operator to flip a switch or insert
> a plug once in a
> while. We had lots of trouble with the tests until
> we discovered that
> it was a very boring job, requiring a skilled
> operator. So the
> operator would start doing something like adjust
> something or look at
> printouts and try to "improve " the test. We solved
> this by including
> messages to the operator from time to time to flip
> this switch, turn
> that dial, ask him what color some panel light was,
> etc., and wait
> until the operator did it, even though the actions
> did nothing. What
> it did do was to keep the operator occupied so that
> he didn't screw
> things up! After we did that the problems went
> away...
>
> So tradeability can be as important as an absolute
> measure of
> performance in the real world but don't confuse it
> with a good or
> bad Sharpe Ratio.
>
> Bob Fulks
>
>
>
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