NinjaTrader_Dierk
ET Sponsor
Hi,
You can hear many rumors, ideas and not-so-true stories about pyramiding, I decided to do some research of my own. I have to stress, that my research is pure system based. So I don't have any discretionary elements in my tests. I'm trying to avoid arguing, and try to calculate some figures which show me what is true and what is not so true.
What I basically do is:
- write some strategies
- test them with and without pyramiding
- compare the results, based on some key figures
It's as easy to describe as it's hard to do
Let's start with a definition. I see pyramiding as "adding to an already open position". I'm well aware that this is not the classical definition ("using unrealized profit to add to an already open position"), but for me it was more convenient to stick to this more "relaxed" definition.
For the first step I focused on trend-following strategies. So I copied some from various sources, and executed them on several instruments of several market in different time frames.
Next I added pyramiding - adding positions of constant size, increasing and decreasing size - and compared the results.
Although I'm not yet done with my research, I now would like to share results and hopefully initiate some discussion. As a first step I attach a summary Excel-Sheet showing some examples (1 strategy, 3 markets) of improved performance by applying pyramiding.
Please note columns:
- MRE: showing the "average max risk exposure" of a trade (smaller figures are better, since risk is reduced)
- AP/DD: annual profit / max drawdown ratio
- PF: Profit factor
Many details are still unmentioned (how are key figures calculated ? what market/timeframes/instruments? how can different markets be compared ? ...). If this issue is welcome, I would be more than happy to share details.
Dierk
You can hear many rumors, ideas and not-so-true stories about pyramiding, I decided to do some research of my own. I have to stress, that my research is pure system based. So I don't have any discretionary elements in my tests. I'm trying to avoid arguing, and try to calculate some figures which show me what is true and what is not so true.
What I basically do is:
- write some strategies
- test them with and without pyramiding
- compare the results, based on some key figures
It's as easy to describe as it's hard to do
Let's start with a definition. I see pyramiding as "adding to an already open position". I'm well aware that this is not the classical definition ("using unrealized profit to add to an already open position"), but for me it was more convenient to stick to this more "relaxed" definition.
For the first step I focused on trend-following strategies. So I copied some from various sources, and executed them on several instruments of several market in different time frames.
Next I added pyramiding - adding positions of constant size, increasing and decreasing size - and compared the results.
Although I'm not yet done with my research, I now would like to share results and hopefully initiate some discussion. As a first step I attach a summary Excel-Sheet showing some examples (1 strategy, 3 markets) of improved performance by applying pyramiding.
Please note columns:
- MRE: showing the "average max risk exposure" of a trade (smaller figures are better, since risk is reduced)
- AP/DD: annual profit / max drawdown ratio
- PF: Profit factor
Many details are still unmentioned (how are key figures calculated ? what market/timeframes/instruments? how can different markets be compared ? ...). If this issue is welcome, I would be more than happy to share details.
Dierk
