Trader's Performance Index(TPI)

V

virtualmoney

Is there a standard performance indicator for a trader?

I notice that trader's perfomance based on %return or sharpe ratio are not sufficient to gauge the quality of a trader.

(sharpe ratio alone cannot indicate trader is generating enough cash returns)

May I propose a "Trader's Performance Index" (TPI) ?

TPI = %R X (%R / %DD) X %t,

for example 90% return, 30% max DD, 12 months time frame

TPI =0.9 X 0.9 / 0.3 X 1.2 = 3.24
 
You have to factor in leverage or max BP used vs. gains in order to include all prop traders. % returns mean nothing to them.
 
Quote from virtualmoney:


May I propose a "Trader's Performance Index" (TPI) ?

TPI = %R X (%R / %DD) X %t,

for example 90% return, 30% max DD, 12 months time frame

TPI =0.9 X 0.9 / 0.3 X 1.2 = 3.24
More...


There is a big bias in your formula because it contains the squared return term. Think of a trader B who returned 180% with 99% DD, 12 months time frame

TPI =1.8 X (1.8 / 0.99) X 1.2 = 3.93

According to the result, this trader is a better performer than the one whose TPI is 3.24, while in reality, trader B was essentially ruined by the 99% drawdown. The TPI formula needs work.
 
No matter what kind of calculation is involved, the basic %R figure should be one of the factors included in measuring a trader or system.
Chop shops, so called prop firms, can use whatever they want, level of leverage, etc, if prop traders do not show %R & %DD, then they are just not transparent with much to hide.

Point noted about the %maxDD>0.9.

How about

TPI = %R X (1-%maxDD) X %t?
 
Quote from virtualmoney:


Chop shops, so called prop firms, can use whatever they want, level of leverage, etc, if prop traders do not show %R & %DD, then they are just not transparent with much to hide.
More...

OK so how do you suggest we do that? Most prop traders sweep their accounts each month to the minimum balance but the buying power remains the same.
 
Quote from virtualmoney:

Point noted about the %maxDD>0.9.

How about

TPI = %R X (1-%maxDD) X %t?
More...

This is better, but still biased. Compare traders A and B:

Trader A returned 40%, had 30% Max DD, but his account also experienced 25% drawdowns every single day.

Trader B returned 40%, had 35% Max DD, and no other drawdowns greater than 1%.

According to your formula, trader A is better than trader B, while the opposite is true.
 
Quote from Dustin:
OK so how do you suggest we do that? Most prop traders sweep their accounts each month to the minimum balance but the buying power remains the same.
More...

You can sweep everything under the carpet but at the end of the day, the bottom line is people want to see is %R accounted in some form in the calculation which they can easily obtain from the accumulated balance data over any period.
 
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