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how do you quantify your performance
- Thread starter yip1997
- Start date
Quote from IV_Trader:
YIP , ave gain per contract is very important , but only in the context of r/r.
If your r/r is 1:50 , then 10$ per contract is not so good.
IV,
I have mixed strategies, so I want to get a simple measure for the overall performance.
Let me rephrase my questions. Perhaps I can get a better answer.
What is a good average gain per contract (an average after long term) for
1. for CTM spreads
2. for FOTM spreads
3. Diagonal
4. Naked writings.
Quote from yip1997:
IV,
I have mixed strategies, so I want to get a simple measure for the overall performance.
Let me rephrase my questions. Perhaps I can get a better answer.
What is a good average gain per contract (an average after long term) for
1. for CTM spreads
2. for FOTM spreads
3. Diagonal
4. Naked writings.
YIP , I cannot answer this in dollars¢cents , because I am trading opposite strategies . But let me give you detailed example of ave vs. r/r :
Lets say you trade a 1:9 r/r. because you have an "edge" ( lets not go there !) your payoff on the winning trade is 1.23 instead of b/e payoff of 1.11 (10/9). Your ave at this point is 10 cents per contract and you thinking about stepping up in size , but...
what if you analyzed first 100 trades where you had only 7 losing trades instead of 9 ( which would be very normal) ? That will make your winning trade payoff only 86 cents , way below of b/e. Noticed , you still are at 10 cents ave at this point.
What ave per contract will be for next 100 trades ( with 11 losing trades instead of 9) ?
Quote from IV_Trader:
YIP , I cannot answer this in dollars¢cents , because I am trading opposite strategies . But let me give you detailed example of ave vs. r/r :
Lets say you trade a 1:9 r/r. because you have an "edge" ( lets not go there !) your payoff on the winning trade is 1.23 instead of b/e payoff of 1.11 (10/9). Your ave at this point is 10 cents per contract and you thinking about stepping up in size , but...
what if you analyzed first 100 trades where you had only 7 losing trades instead of 9 ( which would be very normal) ? That will make your winning trade payoff only 86 cents , way below of b/e. Noticed , you still are at 10 cents ave at this point.
What ave per contract will be for next 100 trades ( with 11 losing trades instead of 9) ?
IV,
I guess I understand it. Let me rephrase it.
The sample size depends on the r/r. If it is a high prob winning strategy, you require a much bigger sample size to have a significant conclusion in the analysis.
The sharpe ratio measures your risk adjusted return.Quote from osho67:
What is sharpe ratio. How do I calculate this. Thanks
Sharpe ratio = (Return â risk free return) / Portfolio Standard Deviation
You would need your daily portfolio P&L data for (I would suggest) 3 months or more so that the data would be meaningful.
You should strive for a Sharpe ratio > +1.
Just to throw in my two cents.
I measure each of the 3 strategies I trade separately and watch how they trend over time. (I want to see quickly when a strategy stops working) I measure my combo positions as a single trade (so, let's say I was doing gamma scalping, the starting straddle/strangle and all of the subsequent adjustments I make counts as a single position, not many).
This year, I've had 1134 legs, but only 363 combos.
Overall, I track:
1) Net results per underlying. I love to trade ENER, but it's so far one of my bigger losers with a win percentage of 67%, but a profit factor of only .79. This stat makes me more "suspicious" of the underlyings I consistently call or manage incorrectly (and more confident in the ones I consistently call correctly). TTWO, on the other hand, has a win% of 57% and a profit factor of 3.56.
2) Win/loss percentage per strategy combined with average winner size and average loser size. For example, my earnings long plays (i.e. I'm expecting a big pop, and I buy an option right before earnings), I'm only correct 29% of the time, but my average winner is 4x larger than my average loser.
3) Results per day. I graph Open P&L, Closed P&L, and Net P&L for the entire year. This allows me to see how volatile my equity curve is and reminds me to "take some off the table" if my Open P&L is dramatically higher than my Net P&L.
Sharpe ratios are more sophisticated and will give you good insight into your overall macro trading results. I prefer seeing my micro results--
1) Am I doing better or worse at a particular strategy than I was before?
2) Are particular underlyings troublesome (or good) for me?
3) Am I leaving too much or too little on the table?
I measure each of the 3 strategies I trade separately and watch how they trend over time. (I want to see quickly when a strategy stops working) I measure my combo positions as a single trade (so, let's say I was doing gamma scalping, the starting straddle/strangle and all of the subsequent adjustments I make counts as a single position, not many).
This year, I've had 1134 legs, but only 363 combos.
Overall, I track:
1) Net results per underlying. I love to trade ENER, but it's so far one of my bigger losers with a win percentage of 67%, but a profit factor of only .79. This stat makes me more "suspicious" of the underlyings I consistently call or manage incorrectly (and more confident in the ones I consistently call correctly). TTWO, on the other hand, has a win% of 57% and a profit factor of 3.56.
2) Win/loss percentage per strategy combined with average winner size and average loser size. For example, my earnings long plays (i.e. I'm expecting a big pop, and I buy an option right before earnings), I'm only correct 29% of the time, but my average winner is 4x larger than my average loser.
3) Results per day. I graph Open P&L, Closed P&L, and Net P&L for the entire year. This allows me to see how volatile my equity curve is and reminds me to "take some off the table" if my Open P&L is dramatically higher than my Net P&L.
Sharpe ratios are more sophisticated and will give you good insight into your overall macro trading results. I prefer seeing my micro results--
1) Am I doing better or worse at a particular strategy than I was before?
2) Are particular underlyings troublesome (or good) for me?
3) Am I leaving too much or too little on the table?
No reason why you couldn't look at the Sharpe ratio for each and every one of your strategies, as well as your overall performace.Quote from FullyArticulate:
Sharpe ratios are more sophisticated and will give you good insight into your overall macro trading results. I prefer seeing my micro results--