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To those with wiser heads than mine:
Up till now, I have had no difficulty interpreting optimization
results, but my optimization has been fairly straight-forward since
I just studied strategies on one stock at a time over years of buy
and sell signals. For these studies, I found 4 columns on the
optimization report most useful: Net%Profit and RAR along with a
comparison of the #winners and #loosers columns.
But now I am doing optimization in a new way and am very confused.
Instead of testing 1 stock over multiple buy and sell periods, I am
testing 600 stocks over a single buy period. The optimization steps
are designed to segment the stocks into groups of about 60 each and
report the results. I had hoped this would let me understand an
interesting time period more fully and allow me to identify clusters
of low risk with reasonable profits. However, some of the columns I
used in the past seem to go crazy now. For example, the Net%Profit
column often reports 1% to 5% profitability even when the winners
outnumber the looser trades and when the average gain colume reports
a 25% average gain per trade. My guess is the 90% of the stocks that
are not bought are including when calculating the Net%Profit. That
also seems to be the case for the Exposure column which is often
below 10%. And the RAR column will can give astronomically high
numbers if the Exposure column is gets below 5%. In short, I know I
should be looking at other columns -- unless there is an option to
select that will exclude stocks not purchased when calculating the
above columens. Is there such an option?
So I am looking at other columns instead. Am I on the right track to
be concentrating on the following columns and is my interpreation of
them correct. I have read the AB documentation, but I still have
some questions:
1. AvgWin/AvgLoss column: This I assume divides the avg gain in
dollars by the average loss in dollars.
2. #winners and #loosers: I look at the ratio between these two.
3. Avg Trade: This column appears to give the average PROFIT in
DOLLARS for all the trades. Since I would find a percentage number
to be more understandable, I set the Initial Equity to 100 on the
system settings screen. But does this affect the results if a
stock's price is 51$? In such a case, does AB buy 1.98 shares or
just 1 share? Am I misleading myself by trying to get this column to
give percentage results.
4. Profit factor: This appears to combine the results of the
AvgWin/AvgLoss column with the ratio of #winners to #loosers. If my
interpretation is correct, this is a very useful column since it
gives an idea of the system's profit to risk characteristics.
However, it sometimes gives no results if there happen to be no
loosing stocks in an optimization step.
Am I looking at the right columns? Am I misinterpreting any?
Thanks in advance for any comments.
b
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