Trading system results overview

Discussion in 'Strategy Development' started by AskQuestions, Aug 14, 2006.

  1. appreciate your opinion.
    thats an interesting point about RF.
    what would you consider as an attractive RF value for your systems (please share with us if its daily/intraday stocks/futures etc)
    thank you
     
    #51     Aug 17, 2006
  2. timmyz

    timmyz

    maybe the line of reasoning below will help set straight the PF bashers/sharpe praisers.

    profit factor is flawed.
    sharpe ratio is not flawed.
    warren buffet's track record has a high profit factor.
    warren buffet's track record has a terrible sharpe ratio.
    therefore, warren buffet's strategy must be flawed.

    lol!

     
    #52     Aug 17, 2006
  3. inCom

    inCom

    I currently trade equities but that's actually not very important. RF is simply final net equity / max drawdown, both in $ or %. So you choose your time horizon and your max DD level, relative to what you have. Personally, I like to see RF above 10 as a bare minimum on at least 10 years of daily data. This implies a 10% max DD.

    GS
     
    #53     Aug 17, 2006
  4. man

    man


    buffet has a modified sharpe of 1.54, with annual return of 22,43%. over thirty years with a multi-billion account you won't here too many comments by any pro that this is anywhere near to "terrible". one of the best, if not the best, quant shop out there, rentec, has a sharpe of 2.6 on their flagship medallion fund. very naive to think you match them when you are trading the same sharpe on a 50k account.

    so, i am afraid, your post is as humorous as ungrounded.

    other hint. if you had a backtest on intraday data like that:

    1999 0.5%
    2000 6.5%
    2001 -6.2%
    2002 10.0%
    2003 21.0%
    2004 10.5%
    2005 6.4%

    would you love to trade it?

    these are the last seven years of berkshire hathaway. now, if you think that i think buffet doesn't do a great job, please return to the beginning of this post. after the third loop you are allowed to read on ...
     
    #54     Aug 17, 2006
  5. timmyz

    timmyz

    hey man cut your losses. the more you try to show how smart you are the more you show how dumb you are. cut you losses. you are obviously not a pro as you think/claim you are.
    i can correct you on this post and on several of your previous posts, but by doing so i will only be doing one thing. i will teach you something. bye.


     
    #55     Aug 17, 2006
  6. man

    man

    which you prove by the fact that you could correct me on several occasions but you don't because you don't want to teach me something?

    ya. very impressive line of argumentation. indeed.
    how dumb am i, how smart are you. and how easily
    you proved that.
     
    #56     Aug 17, 2006
  7. taowave

    taowave

    Hi GS,

    Do you really find AFL language a snap??
    Do you have a programmng background?

    I agree that its very easy to code up simpler backtests in Ami,but I personally found the looping code a bit daunting..

    Any suggestions appreciated
     
    #57     Aug 17, 2006
  8. It is better to keep your mouth shut and appear stupid than to open it and remove all doubt.
    --Mark Twain


     
    #58     Aug 17, 2006
  9. GS19

    GS19

    Taowave
    I know some programming but not a lot. I just learned AFL by looking at examples on Amibroker web site. I mainly like the versatility and speed of Amybroker so it was worth my while to study AFL, glad I spent the time to do so.
     
    #59     Aug 17, 2006
  10. This is exactly why people need to stay away from metrics they don't understand. The examples "man" has given are perfectly plausible and shouldn't surprise anyone. Unless, of course, they're under the mistaken impression that Sharpe and PF measure the same thing.

    Profit factor is a very simple, "bottom line" metric that is calculated by: total wins/total losses. It (as a metric) is NOT "diminished" with an "increased number of trades" AT ALL and will only decrease with more trades if the system's profitability decreases with more trades. It doesn't take variability of returns into account... just the bottom line.

    Sharpe is a measure of reward vs. variability and the denominator of the formula can penalize large gains as well as losses. So a profitable system with a month of exceptionally high performance would be penalized by Sharpe but still have a high PF, while another system steadily returning a tiny amount over the risk-free rate would have a high Sharpe but a low PF (and bottom line).
     
    #60     Aug 17, 2006