Trading system results overview

Quote from AskQuestions:

appreciate your post,
quick question for you about the number of trades.
i understand what your saying about the low number of trades, although i've seen people stating that 30 trades are starting to be statistically sufficient, but how do you take into consideration the number of trades in relation to the time period?
the systems were tested on the same time period: the 1st produced 42 trades and the 2nd 643. shouldn't there be some way to factor this?
thanks,
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The more trades the the better.
If you can get 2000 trades to test with then thats ideal.
More data wont hurt you, it can only prove your system is
not robust which will save you $$$$.

Ofcourse time period is important too, however the longer
the type of trade the more years you have to test.
A long term trend following system would have to be tested
over decades.
A swing trade or once a day system, between 10 and five years.

For intra day system atleast three years.

You also want to look at different types of markets for YM:

Up markets eg 1999,2003
Down markets eg 2002, 2001
Low volality markets eg 2005
High volality markets eg 2002
 
Quote from AskQuestions:

actually this is quite interesting, and i have another question for you businessman (and everybody else)
according to what you said about he 1.5:1 ratio, if you had the choice, what would you prefer:

system A:
winner 50%
and ratio of 1.25 avg win to avg loser

system B:
winner 35%
and ratio of 2 avg win to avg loser

thanks
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I dont think you can make any money with system B,
youll just about break even.

And even if you had a 5:1 ratio, i would find it really hard
to trade a system that only wins 35% of the time. Youd have
to live through 10 to 15 losers in a row quite often.
 
Quote from man:

i would look at sharpe ratio or sortino ratio of daily returns expressed in percentage terms.

profit factor in intraday day is a different story i would think. in general i find a flawed concept. should only be an addon to other figures, not of main interest IMO.
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No offense AskQuestions but profit factor and payoff ratio are both incredibly simple metrics and if you don't understand them, I highly recommend reading up on them until you can easily answer your question on your own. You definitely want at least that level of understanding before trading any system. Not to mention that when you ask others for help, you need to be wary of getting incorrect info e.g., what you got from man... FYI, profit factor intraday measures the exact same thing that it does on all other time frames -- how many dollars/euros/whatever your system has made for each one lost. Period. It's that simple, and it is NOT flawed. However, both Sharpe and Sortino ARE flawed because they FAIL to work as intended under certain circumstances that are not apparent unless you understand exactly how each is calculated. Study them in detail and you'll see what I mean. Also take a close look at the equity curves... they'll give you way more info than any single metric or group of metrics can.
 
i am not offended, and i appreciate any response, and i thank you for your time.
i do understand what profit factor and payoff ratio mean, and they are indeed simple measures.
what i wasn't familiar (and therefore asked for more info) was on sharpe and sortino. i still dont understand what should be considered as "Rf is an expected return of another "standard" asset" (http://en.wikipedia.org/wiki/Sharpe_ratio)
and would appreciate any comment.
could you elaborate on what are the "certain circumstances" in which the sharpe and sortino fail?

last one, what exactly are you looking for when checking the equity curve?
thanks
 
Quote from AskQuestions:

I would appreciate some remarks on the results of a trading system for YM i've been testing.
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Hi. Personally, I've had several systems fail on me in the past couple year so I've kinda learned like everyone else, from mistakes. I'm still learning but here's some generalities I've applied, at least to 1-3 minute timeframes. Maybe it will also give you a warmer feeling about what you've developed;

1) Robustness - Basically, how well does your system perform on all (YM, ER2, ES, QM, and NQ).

2) Make sure you have commissions and at least 1 tick of slippage built in your model

3) Personally, I like Profit Factor greater than 1.5 and Sharpe > 4

4) Equity curve must be smooth

5) Ideally, I would like Longs and Shorts to contribute 50/50

6) Starting with a $25K account and trading only 1 contract, Annual Return greater than 30%, no compunding.

7) People have diiferent pain levels so try and determine if you can psychologically deal with your systems max consecutive losses and max system drawdown.

Just some thoughts. Good Luck.

--jstox
 
Quote from AskQuestions:

i hear what you're saying.
anymore thoughts, would be much appreciated
thanks
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Only thought I would add to the previous post speaking of number of trades during your test period is this ... be cognoscente of the number of trades in your sample vs the average win..... you may find that as the number of winners goes up your average win goes down ... way down and you run the risk of getting chopped up. If the average win goes down to a level where you will end up in the negative when slippage and commission is taken into account you wanna know that ... sounds simple but ends up being an after thought to many folks.
 
appreciate your reply

Quote from jstox:

Hi. Personally, I've had several systems fail on me in the past couple year so I've kinda learned like everyone else, from mistakes. I'm still learning but here's some generalities I've applied, at least to 1-3 minute timeframes. Maybe it will also give you a warmer feeling about what you've developed;

1) Robustness - Basically, how well does your system perform on all (YM, ER2, ES, QM, and NQ).

2) Make sure you have commissions and at least 1 tick of slippage built in your model

3) Personally, I like Profit Factor greater than 1.5 and Sharpe > 4

4) Equity curve must be smooth

5) Ideally, I would like Longs and Shorts to contribute 50/50

6) Starting with a $25K account and trading only 1 contract, Annual Return greater than 30%, no compunding.

7) People have diiferent pain levels so try and determine if you can psychologically deal with your systems max consecutive losses and max system drawdown.

Just some thoughts. Good Luck.

--jstox
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some questions:
1. the robustness issue sound important but do you really think the same system concept should apply to all major futures (YM, ER2, ES, QM, NQ)? are you personally familiar with such concepts?

3. about the Sharpe: i've asked this before but didn't get any answer. how do you calculate this value? are you using some software that does it for you? in the definition here (http://en.wikipedia.org/wiki/Sharpe_ratio), one should define what is the expected return on another "standard" asset, and i'm having hard time figuring what it should be.

7. very good advice. i'll keep that in mind
thanks everyone,
any more???
 
Quote from AskQuestions:

appreciate your reply

some questions:
1. the robustness issue sound important but

3. about the Sharpe

7. very good advice.
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1) From my experience the results should at least breakeven when trading the other futures. Maybe some minor tweaks needed but it's a good indication of an over-optimized system.

3) I use Amibroker, automatically calculates the analysis stuff.

7) History does repeat itself. Yep, that ones critical :)

--jstox
 
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