my mechanical system

I spent about 2 years to develop this system and by Jun 2007 I thought I got a tradable system. Since then I've been paper trading it and found the result is pretty close to that of the backtesting.


Here're the stats from the backtesting.

Initial capital 1000000.00
Ending capital 63293831.91
Net Profit 62293831.91
Net Profit % 6229.38 %
Exposure % 37.25 %
Net Risk Adjusted Return % 16721.12 %
Annual Return % 80.90 %
Risk Adjusted Return % 217.15 %

All trades 1440
Avg. Profit/Loss 43259.61
Avg. Profit/Loss % 1.68 %
Avg. Bars Held 3.63

Winners 997 (69.24 %)
Total Profit 112508751.84
Avg. Profit 112847.29
Avg. Profit % 4.82 %
Avg. Bars Held 3.10
Max. Consecutive 15
Largest win 2202929.09
# bars in largest win 4

Losers 443 (30.76 %)
Total Loss -50214919.93
Avg. Loss -113351.96
Avg. Loss % -5.38 %
Avg. Bars Held 4.83
Max. Consecutive 6
Largest loss -1605008.47
# bars in largest loss 5

Max. trade drawdown -1699113.67
Max. trade % drawdown -47.79 %
Max. system drawdown -2217898.20
Max. system % drawdown -19.53 % (Sept 20, 2001)
Recovery Factor 28.09
CAR/MaxDD 4.14
RAR/MaxDD 11.12
Profit Factor 2.24
Payoff Ratio 1.00
Standard Error 6177863.83
Risk-Reward Ratio 1.04
Ulcer Index 2.77
Ulcer Performance Index 27.23
Sharpe Ratio of trades 2.43
K-Ratio 0.0499

Welcome your comments.

 

System looks fine, but you are compounding your profits, hence you have max drawdown over double you float.

I would re sim the system with a fixed float and/or fixed trade size/risk and see if you still like the results (the Sharpe ratio won't change which is currently very good).

Just remember, sim is only LIKE real trading. Start small, expect a decent initial drawdown and good luck.

pneuma

 

Nice. What happens if you compensate for slippage?

What kind of system is it? Is it a buy low sell high system? Does it trade both long and short?

How much does it risk on a trade? 5 % of equity?

 

What's a float? I am not familiar with the word "float".

 

Paper trading... ahhh they are so cute at that age

 

i will rerun the backtest with fixed amount later today.

can you explain what "float" means?

 

slippage and commission have been taken into account already.

It's a long only system.

Each position takes 20% so there're at most 5 positions.

 

here is what always happens with trading systems:

it will look great with back test, it will look great with walk forward.... then you put real money on the line.... BAMM it blows up

 

actually one of my biggest concern is my database which has about 8000 tickers, but I'd imagine quite some stocks were delisted after 2001 and they're not in my database.

 

is it because the system doesn't work anymore or, is it the person who executes the system doesn't follow the system strictly?