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Discussion in 'Trading' started by LeoK, Aug 6, 2003.

1. ### LeoK

Let's say I have one trade with performance 10% and another trade with performance -6%. How to calculate combined performance from 2 trades?

2. ### maxpi

Convert them from percentages to multipliers of your account, the 10% becomes a 1.1 and the 6% loss becomes .94. Then you can multiply them together to get the overall effect on your account of the two trades.

3. ### LeoK

We are testing a strategy. Our testing program generates a number of trades and calculates % profit / loss on each one.

Trades are in different instruments and prices, so cost base for each one is different.

We don't know what size of account is required to trade the strategy if it is successful, so we cannot correlate with the account size.

The question is: how to calculate combined performance for such a sequence of trade if we have profit for each one in %s.

4. ### Mr Subliminal

You mention "sequence of trades" - does this mean you only take one trade at a time? Please give a specific example of some trades in different instruments together with all relevant info (% profit, is it concurrent with another trade etc.) and then exactly what you wish to calculate and the assumptions to be used (what % of capital you invest per instrument etc.).
Otherwise, maxpi has provided you with the answer.

5. ### LeoK

We are testing a strategy that can be used
concurrently in multiple instruments.
It is one trade at a time in each instrument.

Here are some of the trades generated by our program:

Market,Start,Duration,End,Profit
AA,19880812,43,19881012,13.3365821962313
AA,19881117,43,19890119,17.3039215686275
AA,19911004,43,19911204,0
AA,19950131,43,19950331,8.57845649277442
AA,19950921,43,19951120,-2.32731612710727
AA,19970401,43,19970530,7.87083162398172
AA,19990305,28,19990414,20,-11.5394082607197
AA,20000121,43,20000322,-9.59461279461279
AA,20010323,24,20010426,20.2777777777778
AA,20010614,43,20010814,-10.0968523002421
AA,20010917,43,20011114,14.5987654320988
AAPL,19890621,43,19890821,-1.74418604651163
AAPL,19901224,28,19910201,20
AAPL,19910502,43,19910702,-10.5263157894737
AAPL,19930609,21,19930708,-18.8888888888889
AAPL,19941004,6,19941011,20
AAPL,19950227,43,19950427,0.325732899022801
AAPL,19950915,43,19951114,9.69899665551839
AAPL,19980901,8,19980911,20
AAPL,19981005,43,19981203,10.9926470588235
AAPL,19990308,36,19990427,22.1616541353383
AAPL,20000413,28,20000523,-1.9170403587444
AAPL,20020610,17,20020702,-20.7169459962756

Trades in different markets may or may not coincide.

We are trying to optimize this strategy and make it
usable.
We need to compare results of different tests with
each other.

Until testing is completed we cannot say how big
account is required to trade this strategy or how much
money should be allocated for each instrument.
Percentages are calculated based on equity invested

Considering that percentages are based not an account
size but on a trade equity size we are not sure that
multiplying percentages to get total effect of the
strategy will give us the correct result.
One consideration is that we are not reinvesting the
profit into the next trade, we just trying to compare
test runs with each other.

6. ### damir00Guest

i don't think you're using enough decimal places.

7. ### damir00Guest

if you don't know the size of the account and you have overlapping variable-sized trades then IMO you don't yet have a system because you cannot even say whether or not there will be enough free cash laying around to make the trades(!)

pick an account size that seems "reasonable" based on the max amount you can have in play at any one time.

8. ### Mr Subliminal

From a quick glance at your data, it appears you are exiting the trades upon reaching a 20% profit/loss or 43 trading days, whichever comes first.

Assuming that you "are not reinvesting the profit into the next trade" and that the "trade equity size" remains constant for each instrument, you would have to add (not multiply) the percentages in order to obtain the "combined performance". Any deviation from the above assumptions (and I'm sure there will be some) would naturally need to be taken into account.

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