System Performance Statistics & Evaluation

[CPTrader]

I’m curious as to what system performance statistics (profit factor, net profit, net profit/DD, Mar , Sharpe ratios, Win/Loss%, etc) are most important to systematic traders.

Also what are the most important factors in your system evaluation and in determining that a system is viable for live trading?

Please let’s open this to debate and general discussion.

Thank you.

 

[Anekdoten]

Avg net per trade

Largest drawdown

Longest losing periods

Ratio of winners vs losers

Consecutive losers

Slippage

Commission

How far back is the backtest

That's pretty much what matters to me.

Anek

 

[CPTrader]

For Net profit, Net profit/Drawdown, win/Loss% , Avg Win/Avg Loss, MAR & Sharpe what are the preferred threshold levels?

 

[Mathemagician]

Average Return over Average Drawdown

M

 

[rcanfiel]

Quote from CPTrader:

For Net profit, Net profit/Drawdown, win/Loss% , Avg Win/Avg Loss, MAR & Sharpe what are the preferred threshold levels?

These cannot be answered. Everyone has their own parameters.

It is like asking "what flavor of ice cream do you like?" You are going to get 30+ answers.

 

[RhinoTrader]

Agreed - also depends on the time-frame you are trading in. For example, intra-day in ES I might look for 1pt av profit after slippage. Multi-day it might be 5pts av profit. etc etc

Trade frquency and profit factor are two key stats for profit consistency (look up prior comments from acrary).

Quote from rcanfiel:

These cannot be answered. Everyone has their own parameters.

It is like asking "what flavor of ice cream do you like?" You are going to get 30+ answers.

 

[CPTrader]

Quote from Mathemagician:

Average Return over Average Drawdown

M

Mr. Mathemagician,

This is quite similar to the MAR ratio. What is your preferred MAR - 1, 1.5, 2.0???

 

[Mathemagician]

Quote from CPTrader:

Mr. Mathemagician,

This is quite similar to the MAR ratio. What is your preferred MAR - 1, 1.5, 2.0???

It is, in fact, very much different. I don't have much use for the MAR.

M

 

[CPTrader]

Quote from Mathemagician:

It is, in fact, very much different. I don't have much use for the MAR.

M

How do you measure average drawdown - using daily data or using monthly data? Do you calculate the average of all drawdowns or just the top 5/top x drawdowns?

Hw do you measure Average Return?

Many Thanks.

 

[Mathemagician]

You can use periodic data or trade-by-trade data, and should include all drawdowns no matter how large or small. The maximum drawdown of any system over any period is (perhaps surprisingly) extremely random and is not a reliable way to evaluate a system. Take a look at the drawdown paper and spreadsheet at http://www.nextdsystems.com/research/research.htm. I think you'll be very surprised.

For Average Return I just use average annual return.

M