Matthew,
there is a big fault in the calculations of the APD !
Look for example at "FatCat" :
Drawdowns $ 7,700 , Profit $ 3487
is a APD of 0.45 , but your caluations show 1.57 !!!
MK
The current numbers are: -7681 & 2545 (ignoring the $49 winner with No Calc). But APD is definitely way off. It should be about 0.33
Could you check? Again, formula is:
1) remove No calc lines
2) sum P/L column
3) sum max DD (Drawdown & Risk) column
4 APD = #2 / #3
Ross,
you are right !
APD of "FatCat" should be 0.33 instead of 1.57 !!!
I took $Cumu from the Statistics, but there is a fault too !
It is possible that the calculations are not updated real-time. I think this system might be having high APD since recent trades were much worse??
Ross, Science T, Sam, Lew,
Have enjoyed posts lately.
I have noticed stats are often incorrect(or not caculated as i do them) and have assumed it is a real time issue.
For me, when i monitor a system I copy fills onto excel and do my own stats and apply my preferred money mgt. By doing this I get models back to trading a single lot. Vendors naturally apply different money mgt for various goals from most profit to minimising drawdown.
I haven’t looked at the RT case but the NFI trade may not be off the page with conservative money mgt
good trading
thanks Timothy. I do exactly the same myself: extract the indiv. trade data and apply my own analysis. It also allows me to factor in things like slippage and commissions. Would you mind sharing a bit more on how you apply your “preferred money management”? W.r.t. money/risk management, I trade a portfolio of systems, meaning I should be able to recover from a full collapse of 1 or 2 systems. I also hedge to some degree against the direction of the general market by using index options (b/c we can’t expect the current bull market to continue forever and know little about the performance of many stock systems in a bear market).
Hi, basically i am a fan of the ryan jones approach and his fixed ratio style.(although i tend to reduce the chosen ratio by 10% after certain levels are reached…just puts little more risk into trading once profits are achieved, but still way less than a fixed % style).However need a hundred trades or so to get a good look and decide if any merit in an approach.
i keep different models separate when i trade but always am running a theoretical combined spreadsheet as well (for comparison purposes). I prefer to keep models a little bit separate probably to guard against an NFI situation. With a subscribed system one doesn’t know total logic so always a tiny bit cautious, so don’t mind an external model playing with it’s “own” profit.
obviously some systems require different money mgt methods eg. a model which has variable stops will be better suited to a fixed % risk type of method.
as to how i do it…all manual with excel. I find by going slowly i see problems and think of things as i go
Fixed Ratio is interesting, but Ryan Jones is somewhat of a predatory system provider, has antoagonistic relations with people he has partnered with and has tried to exact high prices for a simple formula (fixed ratio). If I remember, he also drove some fund into the ground once. I have gotten his "amazing new systems" notices for years (Power Trade and many other instances).
There are other variations besides Fixed Ratio (FR). The biggest weakness is that it tends to be sluggish as it grows, since it keeps growing at a FIXED ratio. The most interesting part is that it aggressively cuts the # contracts when a drawdown.
And here is Mr. Ryan Jones, selling you the "Course" for only $995 (http://www.fixedratio.com). Too bad the formula is available for free with a little googling…
- remove No calc lines
The presence of No calc lines indicates that some trades are ignored which in turn indicates that the APD ratio is not a reliable measure…
3) sum max DD (Drawdown & Risk) column
The concept of drawdown is a very arbitrary (neither true nor false) concept. Drawdown becomes true when the position is exited at a loss (if any), at which point it becomes real-ized (valid-ated) and it becomes false when the position is not exited at a loss at which point it becomes un-real-ized (invalid-ated).
There is nothing one can do to or with such an arbitrary measure as the APD ratio except sweep it aside. In the absence of evidence, there is no way to consider any idea, on any subject. An arbitrary idea must be given the exact treatment its nature demands. On must treat it as though nothing had been done or said. The reason is that, cognitively speaking, nothing has been done or said. One cannot allow into the realm of cognition something that repudiates every rule of that realm.
None of the concepts formed to describe human knowledge can be applied to the arbitrary. Since it has no relation to evidence, an arbitrary statement cannot be subsumed under concepts that identify different amounts of evidence; it cannot be described as "possible," "probable," or "certain." Similarly, such a statement cannot be subsumed under concepts that identify different relations between an idea and reality, because an arbitrary statement is neither "true" nor "false."
Instead, use a non-arbitrary (objective) measure like the Profit Factor.
"Instead, use a non-arbitrary (objective) measure like the Profit Factor."
Big Cat has a seemingly decent Profit Factor of 1.5, but averages a max drawdown 10 times larger that its net profit (APD 0.1). So you are convinced that Profit Factor is the great determiner?
It still doesn’t help when people hold & hope or try to average down to pad their track record - it only measures trades based on their result, not on the punishment dished out en route. That is the entire purpose of APD. If you wouldn’t mind pointing out a statistic that exposes this behavior reliably, I am sure we are all ears…
>it only measures trades based on their result, not on the punishment dished out en route
The punishment dished out en route to achieve the result is the real-ized drawdown, which is taken into account by the Profit Factor. What you imagine as punishment is not a punishment unless there is a real-ized loss of money
Justice in the realm of action consists in "granting to each that which is deserved."
To "deserve," states the Oxford English Dictionary, is to "become worthy of recompense (i.e., reward or punishment), according to the good or ill of character or conduct. A reward is a value given to a man in payment for his virtue or achievement; it is a positive such as praise, friendship, a sum of money, or a special prerogative. A punishment is a disvalue inflicted in payment for vice or fault; it is a negative such as condemnation, the withholding of friendship or even outright ostracism, or the loss of money or prerogative, including (in criminal cases) the loss of freedom or of life itself…
"What you imagine as punishment is not a punishment unless there is a real-ized loss of money "
And that is why you still have no concept of what it means to trade in the real world. Now I understand why you railed against APD. You really have no clue about what it means about things like risk vs. reward or other things.
ps: Also, a system/method with a consistent Profit Factor greater than 1.0 is a profitable system; greater than 2.0 is a highly profitable system; greater than 3.0 indicates that it may be a highly optimized system (beware).
Ross,
I agree !!!
"And that is why you still have no concept of what it means to trade in the real world. Now I understand why you railed against APD. You really have no clue about what it means about things like risk vs. reward or other things."
What do you mean about this formula ?
PF * APD * Annual Return
"What do you mean about this formula ?
PF * APD * Annual Return "
I think I need clarification… Is this how you analyze systems?
"The punishment dished out en route to achieve the result is the real-ized drawdown, which is taken into account by the Profit Factor. "
Profit factor (PF) does NOT factor in drawdown. PF is basically the summation of positive over summation of negative trades. What happened along the way is ignored.
"What you imagine as punishment is not a punishment unless there is a real-ized loss of money"
Lets try out your theory. "Sylvia" trades her entire account with leverage factor of 7 (trading ES eminis), following an unleveraged C2 system based on SPY ETFs. System has APD of 0.08 (like BIG Cat recently) - meaning system averages $100 max drawdown for every $8 in net profit.
Does anyone want to guess the probability that Leveraged Sylvia blows out her account (repeatedly), since Palsun claims APD does not matter since it "is not a punishment unless there is a realized loss of money" ???
Ross,
I agree that APD is essential !
Good systems should have PF > 2 and APD > 1 !!!
I am just sometimes amazed at the complete lack of knowledge some people display.
So if an open trade takes your account down 98%, it doesn’t matter, as long as you finish profitably? Who guarantees it doesn’t take it down 101%?
What about a system with PF of 2.99999999? Is this a highly profitable system on the verge of becoming highly optimized (and thus suspect)?
