Averaging Down - Beware

We have progressed further in the discussion here.



But thank you for your comment anyway.

Having a look at your systems, trading for you seems rather difficult.



"My explanation of this occurence it that sharpe is calculated on closed equity only"



Gunnar, all Sharpe ratios are computed on the total equity (open + closed). This is done for both daily and monthly equity values. However, in daytrading system it is possible that all trades are closed within the day.



"A higher APD means that you have to bear less risk to make xy amount of profits."



That’s the idea, but in reality it can be more complicated than this because the risk depends on the total portfolio and the APD is not sensitive to that. For example if you have put and call options on the same underlying then the denominator of the APD can contain a drawdown of both while they actually covered each other. So a low APD is not sufficient to dismiss a system, but it is a reason to investigate the risk.



For a high APD the interpretation is less ambiguous, in that it is clear that the drawdowns were small in comparison to the profits. But a drawdown is not the same as “risk”. With a small drawdown it is still possible that the risk was high because high leverage or a large position was used.



So, as is the case with most statistics, the APD is good in identifying potentiel weaknesses of the system, but it is not good enough to base a blind decision on it.



Combining several statistics into one, like in the WinFactor, seems interesting, but frankly, I think that it is useless. The C2 rating has the same purpose, but most people on the forum (including myself) think that it has too many flaws to be of use. This is not some technical difficulty that can be solved with a little effort; I think it is caused by the fundamental problem that objective “rational” choice cannot be defined when there are many evaluation attributes.



For an analogy, consider the same problem for cars. Suppose you want to compute what the best car is. Some cars are safe, some are fast, some are beautiful, some are cheap, etc. Unfortunately, the economic laws make it impossible to have one car that is the best at all attributes. You can have a car that is fast and beautiful, but then it won’t be cheap. You can have car that is beautiful and cheap, but then it won’t be safe. So what the “best” car is, depends on how important you regard each of the attributes, and that isn’t the same for everybody.



The same is true for trading systems. If you have $1M then the Realism factor will be important for you, but if you have only $10K it can be much less an issue. If you invest in one system then high risk / high reward is not an option, but if you invest in 10 systems then you can afford some of them to be more speculative.



So I think that instead of having one statistic that aggregates all kind of specific statistics, it is better to have a method by which people can specify how much weight they attach to each of the specific statistics.

correct.



Basing a decision on any particular stat is questionable. For example, does a Sharpe of 5.0 mean much for a 2 week old system?



I use APD, Profit Factor, Sharpe, age of system and overall appearance of equity curve as my major stats.

You are making a big mistake if you use APD as a statistic. It is not an objective measure. There are numerous errors in calculations especially for forex systems that trade exotic pairs like DKK, INR, SEK, NOK, HKD, SAR, CZK, HUF, ISK etc.; the errors which MK will not correct. Obviously he is inconsiderate by nature…



In addition, there are numerous documented data errors, calculation errors and display errors that MK is yet to correct in spite of my repeated requests. He says that it is a low priority as I’m the only one trading it. He does not care about the integrity of the statistics displayed at C2. All he is interested in is in promoting scalping systems and auto-trading them so as to make a fast buck…



APD depends on open drawdowns (doesn’t exist) for its input, hence is an arbitrary measure, i.e., not objective. Instead use the Profit Factor and Expectancy Score (highly correlated with Profit Factor) which is an objective measure because it uses the classical drawdown definition of realized losses (which exists) as input.



Productivity (returns) is not only a central element of a good methods life; it is the good methods central purpose. But it is logically interconnected, both in theory and in practice to other virtues (independence (type of orders), honesty (Realism Factor), reliablity (P/L per unit), integrity (Sharpe Ratio) and pride (Max. closed or realized drawdown) as these are all expressions of rationality, the primary virtue. None can be validated in isolation, apart from others; nor can a method practice any of them consistently while defaulting on the others.



So it is essential that you take a look at all these statistics in order to evaluate a system and not look at an isolated statistic. They are all equally important.



If you really want to learn how to evaluate systems, take a look at my system description where I outline what I prefer to do and then use the grid. Also visit some of my methods forums especially Magnum futures method forum…


Folks

The mistake is listening to anything Palsun EVER says. Read any of his other posts and the responses by others to him, and you will understand. Read his posts (never have so few said so much that meant so little!!!). Notice how little is actually conveyed of value in any of the Palsun Paranoid-Perspective, Prose & Puns Posts. Many times, he is the biggest responder to his own Posts. Negative responses on his own forum can get deleted

Ask some of the veteran posters here, Lew P, Sam C, Jules E, and others about the non-value added by Palsun. Follow him and any of his advice at your own peril.

Palsun hears voices. He lives in a dream world. He is paranoid. He is clueless. He is schizophrenic. He talks to himself. Some people suffer from Multiple Personalities; Palsun suffers from Partial Personalities - there are not enough in him to add up to one. He needs to tip his head to let the hot sand run to the other side. The only reason he HAS a head is to keep his ears from banging together. When he talks to himself in the mirror, his reflection is embarrassed; his shadow tries to hide from him. And those are his good points.

The only real world trading experience Palsun seems to have is in bubble gum cards. Maybe also green stamps. This is a person who responded that a 96% open drawdown does not matter because it is "not realized" yet.

APD is a summation of drawdowns compared to a summation of net profits. Palsun has declared a personal vendetta against it, and some other stats. He also has a low opinion of this Collective2 site and its owner, Matthew Klein.

I will also add that Palsun tends to look negatively on APD and a few other indicators, because his own systems tend to fare poorly on them.

Metaphysical rage? I have seen such responses before. It is easy to identify them…

Actually there is no need to rely on the judgement of other posters. Just follow Pal’s own advice: Visit some of his systems and



> Also visit some of my methods forums especially Magnum futures method forum…



If you’re smart this will give you enough information to decide whether you want to spend time with listening to him.

The tool tip for this statistic says an APD of 0.40 and above is quite good and also that only 12.4% of systems has better than Magnum (Conservative) Futures’s 0.44; Still, I consider this a stupid measure, Why? (At one time it was even above 1.20 in the top 5%). Because it is an arbitrary (which in this case reduces to a false) measure…



ps: Irrationalism leads the intellectuals to discard the possibility of independence (of the reality orientation) in favor or the public good, which leads them to falsely conclude that the free market is evil. Thereafter, however scandalously they drop context, rewrite history, or contradict themselves, they feel no shame; so long as they are for the public good, they feel noble. Their epistemology, in short, permits them to manipulate the data as they choose - to reach any conclusions they like in regard to any matter of fact; and their ethics programs them to reach only altruist conclusions…

Or you can just read the ps. of the previous post, that should tell you enough.

Thanks for the tip, mystic Dr. (Witch doctor) Jules.



ps: The intrincist (mystic) regards knowledge, ineffect, as a series of thunderbolts from the beyond (as in auto-trading). In this view, each item (or set of items) is revealed to one as a separate, contextless deliverance. The subjectivist skeptic (Ross et. al.,) regards knowledge as a series of thunderbolts emnating from within human consciousness whether personal (voice from within his head) or social (voice from a social group). In this view, each item or set is invented as a separate, arbitrary caprice. Neither of these apporaches can identify the cognitive necessary of integration, of reduction, of proof. Left to its own devices, neither feels the need of an art of noncontradictory identification…

The funny thing is: If someone else called me a witch doctor, I would not think that he believes what he says, but I might feel insulted. In your case, I think that you really believe what you say, and this makes me laugh.



It’s time to close this thread too.

> ps: The intrincist (mystic) regards knowledge, ineffect, as a series of thunderbolts from the beyond…



Just check Pal’s systems. Click “see all” and you’ll see all 11.

He’s got one good trade that is keeping one system in the black.

Otherwise you will see multiple six figure drawdowns in nearly

every other system. Pal complains drawdowns are some

unimportant delusion of a few like the NFA, CFTC, CTA’s, your broker, most trading softwares, most other traders, etc. Maybe…unless of course you have plans to trade real money. A $200,000 drawdown with real

money is indeed a very real “thunderbolt”.

>He’s got one good trade that is keeping one system in the black.



I disagree, Once again, you are blind with extreme prejudice, as usual…Stop spreading baseless rumors…You are bent on a path of destruction, because you couldn’t make it in your trading career, and your time is running out… So, you have collapsed to full depravity, the Black Mass of the worship of death, the dedication of your consciousness to the destruction of the successful existence of others in order to reduce their level to your mediocrity. This is Egalitarianism at its worst: the act of kicking the scale from the hands of the statue of justice while stripping off its blindfold, leaving men to be ruled not by ordinary prejudice, which would be bad enough, but by the most virulent kind: the prejudice that is identified as hatred of the good for being the good…



You are a hypocrite; There are many examples of this attitude, which has been rampant in our culture, including the hatred of intelligence, of beauty, of ability, of virtue, of technology, of happiness. It is a hatred pursued by those who feel it not as a means to an end, but as a metaphysical rage, for its own sake. Your purpose at C2 is not to benefit the evil, but to smash the good. This is the particular form of injustice…



>Otherwise you will see multiple six figure drawdowns in nearly

every other system.



Once again, those open equity drawdowns ocurred on a single trade when they were in public test mode. That is how I test systems to perfect the timing mechanism. Nothing wrong with that. Several of my methods that incorporate my latest timing mechanism are well diversified and the chance of drawdown (realized losses) in excess of 24% (that is why they are classified as Conservative) or even open drawdowns in excess of 48%.are slim to none.



>Pal complains drawdowns are some unimportant delusion of a few like the NFA, CFTC, CTA’s, your broker, most trading softwares, most other traders, etc.



Exactly, unless they are realized…You do not understand the concept of a drawdown. The truth of a proposition depends not only on its relation to the facts of the case, but also on the truth of the definitions of its constituent concepts (drawdown). If these concepts are detached from reality - whether through lack of any definition or through definition by nonessentials (open drawdowns) - then so are the propositions that employ them. A proposition can have no greater validity - no more of a relation to reality - than do the concepts that make it up. The precondition of the quest for truth, therefore, is the formulation of proper definitions. The truth or falshehood of all of man’s conclusions, inferences, thought, and knowledge, rests on the truth or falsheood of his definitions. You have no idea what “The Truth” is…



>A $200,000 drawdown with real money is indeed a very real “thunderbolt”.



With real money maybe, depending on the account equity size, not in simulation test mode (when it is paper traded…)…even then, you should look at the percentage of account equity, otherwise it is meaningless…

To the readers, do you now understand why to avoid Palsun?

> Once again, those open equity drawdowns ocurred on a single trade when they were in public test mode.



This system is not in test mode (yet):



System Details: Midas (Prudent) Futures



It had a $300,000 draw down as the result of dozens of large closed losing trades. It also had three $200,000 drawdowns.



This is not an attack “blind with extreme prejudice, as usual…(based on) baseless rumors…”. These are the simple facts based

on the C2 track record. Anyone can click on the system and see…

hurry though: it could become a “test” system before today’s close.



I disagree. It was in a public test mode (I was testing a weekly system without hedging with futures options as they are not available at C2) sometime back when those closed drawdowns occurred. As I said once again you are motivated by extreme blind prejudice…You may also be suffering from a loss of memory, a sure sign of post-menopause syndrome…

You are another dude at C2 whose main purpose is not to benefit the evil, but to smash the good…

"I disagree. It was in a public test mode (I was testing a weekly system…)".



I do apologize. I am confused. I read that it was switched to

"test" after the four $200,000 draw downs:



Midas (Prudent) Hedge Midas (Prudent) Test 1/13/07 5:42



Sometimes the system changes names four times per day. Kind

of a name change scalping deal I guess. I do apologize for not

keeping up. Prudent, conservative, hedge, test, beta, (O), ©,

ouch! My head is starting to hurt! You win!



"The name of this system has been changed 37 times (View history)



Original name Changed to When changed

Midas Med-Term (Prudent) Midas Med-Term Futures (Prudent) 3/12/06 18:50

Midas Med-Term Futures (Prudent) Midas Med-Term Commodities (Prudent) 3/12/06 18:54

Midas Med-Term Commodities (Prudent) Midas Med-Term Futures (Prudent) 3/12/06 19:45

Midas Med-Term Futures (Prudent) Midas Med-Term (Prudent) 3/12/06 20:19

Midas Med-Term (Prudent) Midas Med-Term (Prudent)(O) 4/2/06 22:24

Midas Med-Term (Prudent)(O) Midas Med-Term (Prudent) Test (O) 5/14/06 19:16

Midas Med-Term (Prudent) Test (O) Midas Med-Term (Prudent) (O) 6/2/06 8:06

Midas Med-Term (Prudent) (O) Midas Med-Term (Prudent) (Beta) (O) 6/3/06 10:07

Midas Med-Term (Prudent) (Beta) (O) Midas Med-Term (V. Agg.) (Beta) (O) 6/3/06 13:45

Midas Med-Term (V. Agg.) (Beta) (O) Midas Med-Term (Prudent) (Beta) (O) 6/3/06 15:47

Midas Med-Term (Prudent) (Beta) (O) Midas Med-Term (Prudent) (O) 6/3/06 15:55

Midas Med-Term (Prudent) (O) Midas Med-Term (Prudent) © 6/14/06 8:13

Midas Med-Term (Prudent) © Midas Med-Term (Prudent) (O) 6/14/06 16:25

Midas Med-Term (Prudent) (O) Midas Med-Term (Prudent) (Beta) (O) 6/25/06 12:03

Midas Med-Term (Prudent) (Beta) (O) Midas Med-Term (Prudent) (O) 7/4/06 8:13

Midas Med-Term (Prudent) (O) Midas Med-Term (Prudent) (Beta) (O) 7/4/06 21:04

Midas Med-Term (Prudent) (Beta) (O) Midas Med-Term (Prudent) (O) 7/8/06 22:23

Midas Med-Term (Prudent) (O) Midas Med-Term (Prudent) Hedge Fund (O) 7/9/06 11:16

Midas Med-Term (Prudent) Hedge Fund (O) Midas Med-Term (V. Agg.) Hedge Fund (O) 7/22/06 21:28

Midas Med-Term (V. Agg.) Hedge Fund (O) Midas Med-Term (V. Agg.) Hedge Fund (O.) 7/29/06 20:33

Midas Med-Term (V. Agg.) Hedge Fund (O.) Midas (V. Agg.) Hedge Fund (Open) 7/31/06 8:22

Midas (V. Agg.) Hedge Fund (Open) Midas (V. Agg.) Hedge Fund (Closed) 8/2/06 10:02

Midas (V. Agg.) Hedge Fund (Closed) Midas (V. Agg.) Hedge Fund (Open) 8/26/06 21:03

Midas (V. Agg.) Hedge Fund (Open) Midas (V. Agg.) Hedge (Open) 8/28/06 14:23

Midas (V. Agg.) Hedge (Open) Midas Hedge (Open) 8/29/06 7:22

Midas Hedge (Open) Midas (V. Agg.) Hedge (Open) 9/9/06 17:57

Midas (V. Agg.) Hedge (Open) Midas (V. Agg.) Hedge 9/17/06 1:45

Midas (V. Agg.) Hedge Midas (Prudent) Hedge 9/27/06 17:57

Midas (Prudent) Hedge Midas (Prudent) Hedge (Open) 9/28/06 19:50

Midas (Prudent) Hedge (Open) Midas (Prudent) Hedge 9/30/06 6:25

Midas (Prudent) Hedge Midas (Prudent) Test 1/13/07 5:42

Midas (Prudent) Test Midas (Prudent) Hedge 1/24/07 21:18

Midas (Prudent) Hedge Midas (Prudent) Test 1/30/07 19:12

Midas (Prudent) Test Midas (Prudent) Hedge 2/1/07 11:04

Midas (Prudent) Hedge Midas (Prudent) Test 3/2/07 20:19

Midas (Prudent) Test Midas (Prudent) Futures 3/8/07 19:08

Midas (Prudent) Futures Midas (V. Agg.) Futures 3/19/07 14:41"

> extreme blind prejudice…You may also be suffering from a loss of memory, a sure sign of post-menopause syndrome…



You are right. I am Samantha Cook.



You and EU come from the Borat school of insults I guess. Calling

someone a woman or a girl is somehow an insult? Hmmm…OK.



Did you know your heroin Ayn Rand wrote Atlas Shrugged when

she was in her 50’s? Do you think there are any “sure sign(s) of post-menopause syndrome…” in Atlas Shrugged?



http://www.ayn-rand.com/ayn-rand-biblio.asp



Be careful what “insults” you throw out there…