It appears the wealth lab score is very correlated with the APD ratio.
The Wealth Lab Score is calculated as:
In Wealth-Lab Pro, the Wealth-Lab Score is calculated by first finding the Annualized Risk Adjusted Return, which is simply the Annual Percentage Return, or APR, divided by percent Exposure. For profitable systems, the RAR is adjusted by multiplying the sum of 1 plus the Max Drawdown Percent (a negative number). Consequently, profitable but risky systems, which typically have periods with large drawdowns, will have a lower score than an equally profitable system that assumes less risk. In summary, the formula for Wealth-Lab Score is:
xRAR=APR/Exposure
where xRAR is the annualized RAR. If xRAR is greater than 0 (profitable) then
WLScore = xRAR × ( 1 + MaxDrawDownPct )
I think they’ve had the same measure as you in a different calculation for the APD stat.
For example, with an APR of 8.0, an Exposure of 25%, and a Max Drawdown of -15.0%, the Wealth-Lab Score is:
( 8.0 / 0.25 ) * ( 1 - 0.15 ) = 32 * 0.85 = 27.20
Non-profitable systems result in a negative Wealth-Lab Score. The formula, which changes for negative RAR, more heavily penalizes non-profitable systems for their inability to overcome drawdown. Consequently, if xRAR is less than 0 (not profitable) then
WLScore = xRAR × ( 1 + Abs( MaxDrawDownPct ) )
Taking the same example with an APR of -8.0, we obtain a Wealth-Lab Score as follows:
( -8.0 / 0.25 ) * ( 1 + 0.15 ) = -32 * 1.15 = -36.80
If you’re wondering how [LINKSYSTEM_25716110] looked before I nixed it, we’d have
Long + Short Long Only Short Only Buy & Hold
Starting Capital $100,000.00
Ending Capital $451,466.44
Net Profit $351,466.44
Net Profit % 351.47%
Annualized Gain % 135.11%
Exposure 33.92%
Number of Trades 34
Avg Profit/Loss $10,337.25
Avg Bars Held 2.32
Winning Trades 27
Winning % 79.41%
Gross Profit $473,417.09
Largest Winning Trades $67,020.54
Avg Profit $17,533.97
Avg Bars Held 2.44
Max Consecutive 8
Losing Trades 7
Losing % 20.59%
Gross Loss $-121,950.65
Largest Losing Trade $-38,620.60
Avg Loss $-17,421.52
Avg Bars Held 1.86
Max Consecutive 1
Max Drawdown $-52,976.63
Max Drawdown Date 4/14/2008
Max Drawdown % -11.23%
Max Drawdown % Date 4/14/2008
APD 0.9161
Which I do recall being that high at one point with an APR of around 180%. I know Ross can remember claiming to remove it from his watchlist after it dropped below 0.7 or around there. Not so after the last of the drawdowns, just at my height.
Wealth-Lab Score 353.5493
RAR 398.2723
MAR 12.0323
Profit Factor 3.8820
Recovery Factor 6.6344
Sharpe Ratio 3.2500
Sortino Ratio 20.4542
Ulcer Index 2.8614
WL Error Term 6.1810
WL Reward Ratio 21.8596
Luck Coefficient 3.8223
Pessimistic Rate of Return 2.2751
Equity Drop Ratio 0.0128
K-Ratio 2.0964
Seykota Lake Ratio 0.0228
Expectancy 0.9320
Expectancy Score 16.7928
People mostly misunderstand the Pessimistic Rate of return is actually a decimal, so 2.2751 is really 227.51%
Wait, looked at the definition, subtract one, then do it as a percentage, 127.51%, and from superbands something lower.
Take a look at the description that C2 gives for other statistics. It is clear that they address people without much mathematical insight and who are new at C2. Such persons need basic guidelines for interpretation. Merely stating the formula is not enough. Also, the formula is based on a theory about trading (‘hold & hope is bad’) and without stating this theory even persons with a strong mathematical background will find it difficult to guess the purpose of this statistic.
I have really no idea what your point is.
The difference is significance. With 28,726 I can be confident to the 1000th of an interval, if we were to calculate one, that it has positive expectancy.
Just saying, the APD was calculated approximate to the backtest at the time, and also if people ever wondered.
I have still no clue what you are trying to say with all these posts. Please stay on topic or explain your point.
OK I think this is where we are now, I’m going to amalgamate what we’ve discussed with what the original C2 text had and try to make the wording more concise, do we think we could go with this:-
“The APD Ratio (“Average Profit to Drawdown”) measures how much profit is made for each dollar of drawdown suffered while a trade is open.
A high APD means that on average, the system makes trades with high returns in comparison to drawdowns.
A low APD can result from averaging down or allowing open losses to run in the hope they recover to achieve relatively small profits. This is considered a high risk strategy.
Other possible causes of low APD are the system applies a hedging strategy, or the system has many small losing trades and less frequent but large winning trades. These strategies do not necessarily imply a high risk.
In summary: a high APD is good but a low APD is not always bad.”
So what? We were discussing the explanatory text of APD. I suggest you make another thread.
I think that’s a better wording.
Something with:
"Please consider other excess performance measures when making your decision to subscribe."
" I’d be fine with Net Profit/Total Drawdown."
It isn’t Total Drawdown, And it is totally independent from Max SYSTEM DD. It is the summation of all max per-trade DDS. this distinction is important
That’s how I calculated it Ross, on each trade.
Sounds fine to me!
That’s just just how I interpreted it.
Somewhere it changed to that, when I was going more into the theory, rather than explaining it, but maybe we’re being more productive rephrasing its presentation to the community.
I can’t hardly read all of what you guys are discussing regarding the APD stat. I would think if that much effort used in another direction would surely develop a winning strategy!
Who uses APD? Many I guess, but it doesn’t strike me a something to consider. Why? Because any system will usually blow up within a year. If one does well for say longer than 1.5 years - and all market periods are experienced (corrections, bull rallies and bear markets) can’t one easily drill down and see how much risk is being used?
APD? Just in passing it would seem what is trying to be avoided can easily be replicated in a winning or even neutral performing system. So then what does it tell you?
I’m certainly not an expert APD debater - but the verbiage Jon presents strikes me as quite appropriate.
Regards,
Gilbert
(insert any system I would put here, lol)
I am looking at the other statistic definitions in the same area. No other statistic gyrates about being sensitive to the feelings of vendors. For example:
(Realism):
What the numbers mean
The Realism Factor is a number between 1 and 100. A Realism Factor of 100 means you are very likely to achieve the same results as those described on C2. A Realism Factor of 1 means you are unlikely to achieve these results.
See any medical attention for the feelings of systems that Realism might slight?
So I still do not agree that this needs to patch up the wounds of offended vendors when certain hypothetical cases can be imagined. I prefer a simple explanation wit the two possible applications for Averaging Down and Hold&Hope.
I see no more reason to surgically alter APD then PF, Realism, Keep after WC Slippage or others. APD offers a view on the behavior of other systems. Like other stats, it might not reflect well on certain systems to the happiness of a few vendors. Frankly, that is tough. Stats are for the subs, not for the vendors. A smart sub considers the stats as a whole, and makes an informed decision.
I mostly consider this a whole exercise in futility. I still see rants from the other thread and a continuation of theory here.
The earlier simple definition I proffered is by far my favorite. Either all stats list a few types of systems they may denigrate or none of them do. This is getting almost ridiculous.
