back start next
[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [ 53 ] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95] [96] [97] [98] [99] [100] [101] [102] [103] [104] [105] [106] [107] [108] [109] [110] [111] [112] [113] [114] [115] [116] [117] [118] [119] [120] [121] [122] [123] [124] [125] [126] [127] [128] [129] [130] [131] [132] [133] [134] [135] [136] [137] [138] [139] [140] [141] [142] [143] [144] [145] [146] [147] [148] [149] [150]
53  Figure 9.3 Rolling equity curve. RINAl qNSP 460000-Daily (08/19/85-08/01/97)  Figure 9.2 Detailed equity curve.
Underwater Equity Curve The underwater equity curve serves as a pessimistic review of equity performance over time. Each bar above the zero line represents a new equity high based on monthly data. The negative curve between equity peaks represents the percent re-tracement from the previous high. In realistic terms, it details the pain and suffering experienced by the system over time. The duration and magnitude of monthly drawdowns are graphically illustrated in a single equity chart. Figure 9.4 is an example. Average Monthly Equity Curve The average monthly equity chart is based on the systems individual monthly returns. The average return per month serves as a general seasonal overview of trading performance. Figure 9.5 is an example. Total Trade Analysis Unlike the general overview, this section fine-tunes the evaluation process and centers on the systems individual trades. The goal is to evaluate the overall performance of the system by critiquing each trade (see Box 4). This section centers on total trades; however, smaller subsets of trades should also be evaluated. These include winning and losing trades. Focusing on these trades separately helps to quantify the systems performance in even greater detail. Figure 9.4 Underwater equity curve. RTNAl qNSP 460000-Daily (08/19/85-08/01/97) 
Figure 9.5 Profits per trade. Average Profit By Month RINA1 qNSP 460000-Daily (08/19/85-08/01/97) 10000  Special Note: The more rules used by a system, the greater its degrees of freedom (DoF). DoF represents the amount of flexibility a mathematical formula has in attempting to model data. To keep your trading system from modeling rare, mostly unrepeatable events, keep its DoF as small as possible and the data set as large as possible. Design your system to be as simple as you can reasonably make it and use as much historical data to test your system as you can.2 The goal of having a large data set is to get your system to produce as many trades as possible in order to be statistically meaningful. Too few trades and the system could just be profitable on a fluke of the market that may never reoccur. BOX 4 TOTAL TRADES Average trade: The average profit/loss for all the trades. Standard deviation (STDEV): Measures the absolute variability of the returns of all of the trades. The smaller the number, the less deviation there is between trades. Coefficient of variation: Expresses the standard deviation as a percentage of the mean. This percentage figure relates to the stability of the trades.
[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [ 53 ] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [80] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95] [96] [97] [98] [99] [100] [101] [102] [103] [104] [105] [106] [107] [108] [109] [110] [111] [112] [113] [114] [115] [116] [117] [118] [119] [120] [121] [122] [123] [124] [125] [126] [127] [128] [129] [130] [131] [132] [133] [134] [135] [136] [137] [138] [139] [140] [141] [142] [143] [144] [145] [146] [147] [148] [149] [150]
|
Menu
