One Single "Tie-Breaker" Metric

Discussion in 'Strategy Building' started by TradersRUs, Apr 28, 2021.

  1. There are 2 closely related strategies (but not the same), that produce similar (and good/tradeable) results over 20 years of backtesting on a variety of different stock baskets. In some periods and/or baskets, one is "ahead" (in terms of not only net profit, but also all the typical metrics like Sharpe ratio, Profit factor, drawdown, etc. etc.) while the other is ahead at other combinations of periods/baskets (using the same metrics). The difference in terms of net profit between the two varies and can be as high as +-30%, but neither one comes out higher consistently.

    How would you resolve the dilemma of picking 1 strategy out of the 2 to live-trade with?
    Specifically -

    Which single solitary metric can one rely on to be the "tie-breaker" in such a case?
  2. jelite


    Are you restricted to picking only one or can you allocate X% of risk to first and 1-X to second?
  3. "20 years" is completely irrelevant.

    The market dynamics (and who is powering the move, whatever it is) are only relevant to NOW. (The market's "what" and "who is driving it?" shifts over time.) "20 years ago" market history is irrelevant to now... other than "chart support and resistance", "relative strength", of course.

    Trade WHAT... without consideration as to "whom" you think is behind it.

    KISS, baby!
    Last edited: Apr 28, 2021
  4. They are too similar - one has a slight twist on the other. Trading both at the same time would produce mostly the same signals and be confusing.
  5. guru


    Some hedge funds trade thousands, if not hundreds of thousands strategies, allocating small % to each one. So you should be able to trade two strategies with 50% allocation each.
    Otherwise pick one with the highest sharpe, or highest average %return, or even a random one. You won't be able to determine which one may do better in the future.
    Nobert likes this.
  6. 2rosy


    lowest standard deviation of your holding time
  7. Thanks. This is the kind of specific response I am looking for.

    I have not come across this metric before. Is there a standard name for it, or is this something custom you have come up with?
  8. guru


  9. sonoma


    What are their correlations?
  10. And you know that how? I am not sure whether you ever handled a backtest with your Visual Basic skill set and daily data from yahoo finance. :D

    #10     Apr 28, 2021