System Performance Score

I PROVED that what I called "Bad Kelly" is not Kelly at all. Would it help you understand it better if I called it "Not Kelly"?

If the SPS values I calculated based on your systems don't make sense, you've yet to point out why.

Let's take another look at your systems:

System E : [-8, -8, -8, +25, +25]
System F : [-8, +8, +8, +168, +400]

If you seriously regard system F as only twice better than system E, you should spend more time critiquing your own measurement than mine.

 

Then use the Eckhardt criterion instead. He explained why he chose 1800 trades.

But the idea of no upper limit is ridiculous. You can make a lousy system look good by simply padding your trade count when there is no upper limit to the trade count in your performance measure.

 

These are not the systems that I gave in my examples, and I never said anything about systems E and F. So, you are misquoting me, and it looks like you are looking to argue just for the sake of arguing. So I am out of here.

 

You kept calling different systems A and B. That would cause confusion when I put them all in one post, so I did the logical thing and relabelled some of them.

Here are the last two systems you posted:

[-8, -8, -8, +25, +25]
[-1, +1, +1, +21, +50]

As you yourself pointed out, the last system is the same performance-wise as

[-8, +8, +8, +168, +400]

Your obtuseness is deliberate and shameful.

 

The theory should be obvious based on what I've posted.

The SPS is the Kelly ratio multiplied by the average winning trade return. A logical trader wants both of those to be as high as possible, so increasing either increases the SPS value. I chose the LessBad Kelly formula for ease of calculation since it didn't matter if it was a dead-on match to true Kelly. I'm not trying to calculate true Kelly, I'm trying to develop a logical performance measure. Mission accomplished.

[-8, -8, -8, +25, +25]
[-8, +8, +8, +168, +400]

Your Sharpe ratio says the latter system is barely more than twice better than the former. That defies common sense.

 

Indicative (relative values) only:


System : [-8, -8, -8, +25, +25]
SPS 0.5

System : [-1, +1, +1, +21, +50]
SPS 6

System : [-8, +8, +8, +168, +400]
SPS 22

 

I don't know what you're measuring but it's not SPS so please stop calling it SPS.

Wouldn't hurt to show your work either.

 

Indicative (relative values) only:


System : [-8, -8, -8, +25, +25]
Relative Performance Index: 0.5

System : [-1, +1, +1, +21, +50]
Relative Performance Index: 6

System : [-8, +8, +8, +168, +400]
Relative Performance Index: 22

Just for fun!

 

First, I'm not sure what 'common sense' has to do with it. Common sense doesn't really tell me whether the second system is twice as good, or 100x as good.

Now, you are talking about performance comparison given risk aversion (which the sharpe and the classic kelly assume to be risk neutral). Given that risk aversion is subjective and varies individual to individual, I don't believe you've made any contributions there.

Finally, as you now want to do 'how much better' than just 'is it better', are you really saying that a system that does 600 trades is EXACTLY 1.2x better than one that does 500 trades? There's nothing to base this 1.2x being the right factor at all.

Anyway, you've yet to demonstrate how your SPS would rank systems significantly better than IR in any meaningful sense.

 

Copper in the news today.
Interestingly, not really affected much...up 3 pennies actually.
http://www.marketwatch.com/story/do...a-malpractice-suit-2013-03-22?dist=lcountdown