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Dimitris,
I want to learn some things about backtesting now. What is
CAR? MAR? MDD? I don't see these columns when I optimize - just
learnt how to run one. Is there a way to get this columns, the only
one that I can see is RAR.
tia
nand
--- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> Dingo,
>
> I assume you addressed this to Chuck, but I'll give you my own take
> on 1a of what you asked ...
>
> 1a. I have tried lots of combinations of things to optimize on and
> have pretty much settled on what I and some others refer to as MAR
> which is CAR / MDD. This has the advantage of finding parameters
> that simultaneously elevate CAR while keeping down DD's. There are
> other steps involved here to assure that the parameters chosen are
as
> robust as they can be and sometimes at the cost of a little MAR but
> that's another topic. When writing systems and testing them for
full
> compounding whether that compounding takes the form of increased
bet
> size or increased number of simultaneous trades that can be made,
the
> equity curve should be as close as possible to a straight line on a
> log scale. KRatio is an indication of the straightness of the
equity
> curve but I also like to see it plotted. The other advantage to
> looking at equity curves on a log scale is that for example a 10%
DD
> looks the same regardless of where on the chart it occurs. If you
> plot the equity curve on an arithmetic scale the farther to the
right
> the larger dd's occur the more insignificant (falsely) they appear
to
> be.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "dingo" <dingo@xxxx> wrote:
> > I can understand and appreciate why you use fixed trade sizes in
> order
> > to get the best parameters. But how do you get a reasonable
measure
> of
> > drawdowns that way? Do you use some other technique to evaluate
> > drawdowns?
> >
> > Re your param selection method: Do I understand the steps
> correctly:
> >
> > 1. You optimize for the best params
> > a. Based on what column or calculation?
> > b. What date ranges would you be using currently?
> > c. What subset of stocks would you be optmizing on?
> >
> > 2. You set aside the the top 100.
> > a. Do you set aside any at the bottom?
> > b. How did you determine that the first set of params
would
> be
> > at the edge of the parameter space?
> >
> > 3. You reoptimize the resultant set from step 2 and those are the
> ones
> > you use.
> >
> > Given the size of your trading capital how do you decide what
> stocks to
> > trade on a particular day?
> >
> > I'm not trying to pick a fight here I'm intensely curious as I've
> been
> > struggling with these questions for quite some time now.
> >
> > Thanks for any comments you choose to make.
> >
> > d
> >
> > -----Original Message-----
> > From: Chuck Rademacher [mailto:chuck_rademacher@x]
> > Sent: Thursday, April 17, 2003 6:58 AM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] To compound or not to compound... that is the
> > question
> >
> >
> > Reply to Fred:
> >
> > Yes... and no.
> >
> > Absolutely, in real time trading I am compounding.
> >
> > To determine parameters via optimization.... not if my life
> depended on
> > it! And, I guess my life does depend on it, as I make my living
> > managing funds for others.
> >
> > I mentioned one trade (AOL) where my system made $1.5 million on a
> > $10,000 investment. That's not bragging... I'm sure you could
come
> up
> > with a system that could achieve similar performance. Since the
> > average trade generated a profit of $2,700 for every $10,000
> invested,
> > the AOL trade could cover up lots of bad trades made using one
> parameter
> > set. Compounding that trade would exacerbate the problem. A
> minor
> > tweak to the parameters could cut out the AOL trade, yet that
very
> tweak
> > could improve performance going forward.
> >
> > When choosing parameters, I want plain vanilla trades, each
> standing on
> > their own merit, with no compounding.
> >
> > We may have to agree to disagree. It's like absolute gospel to
me
> and
> > I cannot see clear to do it any other way.
> >
> > -----Original Message-----
> > From: Fred [mailto:fctonetti@x...]
> > Sent: Thursday, April 17, 2003 3:16 AM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] FW: [aaft_ta] Re: TradingRecipes
> >
> >
> > Chuck,
> >
> > I'm sure you'd agree, wouldn't you ?, that one way or another you
> > compound. If you are not compounding by increasing bet size then
> you
> > are compounding by increasing the number of stocks you'll
> potentially
> > take simultaneous positions in as equity grows, right ?
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
> > <chuck_rademacher@x> wrote:
> > > For what it is worth, I use fixed bet size for all backtesting
> > purposes. I
> > > coudn't imagine backtesting/optimizing using any other
approach.
> I
> > even go
> > > a step further if I'm doing any optimizing. I recently posted
> an
> > equity
> > > curve showing something like $80 million in profit. Within
that
> > $80
> > > million, the top 100 stocks (out of 13,500) generated $20
million
> in
> > > profits. AOL, by itself, generated $1.5 million in profits.
In
> > each case,
> > > the original trade was only $10,000.
> > >
> > > As I said, I go a step further than just using a fixed bet
size.
> > After my
> > > first pass at optimizing, I remove the top performing 100
> stocks.
> > I then
> > > re-optimize without those stocks. Granted, I could end up with
> > some new
> > > "top" stocks. However, my objective is to remove the extremely
> > large
> > > winners so that the profits from those stocks don't cause me to
> > select
> > > parameters on the edge of the parameter space.
> > >
> > > I don't bother removing the worst performers as the largest
loss
> > might be
> > > something like $16,000 (even though the original trade was only
> > $10,000).
> > > This can happen if a short trade goes against you.
> > >
> > > As I said... for what it's worth...
> > > -----Original Message-----
> > > From: Bob Jagow [mailto:bjagow@x...]
> > > Sent: Thursday, April 17, 2003 2:21 AM
> > > To: Amibroker
> > > Subject: [amibroker] FW: [aaft_ta] Re: TradingRecipes
> > >
> > >
> > > Re the "portfolio level testing" magic bullet.
> > >
> > > Bob
> > > -----Original Message-----
> > > From: Palmer Wright [mailto:palmerw@x...]
> > > Sent: Wednesday, April 16, 2003 8:27 PM
> > > To: aaft_ta@xxxxxxxxxxxxxxx
> > > Subject: Re: [aaft_ta] Fwd: Re: Available Portfolio testing
> > programs for
> > > TS2000i
> > >
> > >
> > > Since Michael forwarded the two messages (see below), he
added
> > four
> > > additional ones. The issue about whether a "basket system" like
> > Aberration
> > > is worth trading I will not discuss here (I still trade it).
The
> > other main
> > > issue is about the effect of compounding when testing with TR
> > (Trading
> > > Recipes), and I comment here on that.
> > >
> > > Traders buy TR because it can test portfolios of systems and
> > markets using
> > > position sizing. A position-sizing strategy such as fixed-
> > fractional money
> > > management brings two advantages: it normalizes markets (eg.,
> > calculating
> > > many contracts for corn, but few for natural gas), and limits
> entry
> > risk for
> > > each position to a fixed- fraction of current equity--thus
> > preventing
> > > overtrading. If you do not use TR, I do not know how you can
get
> > the large
> > > returns that compounding multiple markets can bring.
> > >
> > > Leslie Walko points to the potential danger of curve fitting
> > caused by
> > > compounding. I agree, and have been concerned for years about
how
> > one market
> > > in a portfolio (commodity X) by being dramatically profitable
in
> a
> > single
> > > year can misleadingly bias the results of the whole portfolio.
> > >
> > > During a multi-year test in TR, starting equity is low,
perhaps
> > $100,000,
> > > but compounding raises equity to many million in later years.
The
> > one-year
> > > outperformance of commodity X cand produce two kinds of curve-
> > fitting bias:
> > > early-years bias and end-years bias. Mark Johnson's message
> > describes the
> > > first, where X gives "a big turbocharged boost" to the
> portfolio's
> > equity,
> > > which then gives a head-start boost to the number of trades in
> all
> > the
> > > commodities traded. The second occurs when X's monster trades
> occur
> > in the
> > > final years of the simulated time period when the large number
of
> > contracts
> > > makes X's profit far larger than if its big year came early.
Here
> > the
> > > profits contributed by X dwarf what they were in the first case.
> > >
> > > As the message from M points out, we can avoid such biases by
> > normalizing
> > > with a fixed-dollar bet size in testing to remove the galloping
> > equity
> > > effect. I proposed this method in 1999, and still use it to
> compare
> > with the
> > > compounded performance. I confess, however, that my testing has
> > failed to
> > > find as much performance bias as I suspected I would find. The
> > method is
> > > most important when selecting markets for a portfolio.
> > >
> > > Palmer Wright
> > > ----- Original Message -----
> > > From: Michael Guess
> > > To: aaft_ta@xxxxxxxxxxxxxxx
> > > Sent: Sunday, April 13, 2003 9:14 AM
> > > Subject: [aaft_ta] Fwd: Re: Available Portfolio testing
> > programs for
> > > TS2000i
> > >
> > >
> > > This is for Pat Mazur & Palmer Wright. Others are invited
to
> > comment. I
> > > forwarded these two messages from another list because we have
> > discussed
> > > these issues in the past. It appears one of the posts is saying
> > Trading
> > > Recipes is in error in the way it calculates. In fact, that it
> > curve fits
> > > data in a particular case. Comments are invited.
> > >
> > > Michael
> > >
> > >
> > >
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