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New stats available: Leverage (average and maximum)

#1

C2 now measures the maximum leverage deployed by a strategy during each trading day. It displays the maximum leverage deployed, and the average daily leverage. You can see these stats here:

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In addition, you can apply the daily leverage stat to the equity chart (by pressing the little chart icon near the Leverage statistic). You will see something like this:

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P.S. Oh, in addition, we included some new stats in the Summary Statistics pane, as shown in the first screenshot above. These include Sharpe, Sortino, Beta, and Alpha. All of these are measured using daily returns data.

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#4

I like it. It even points out where I messed up and went a little overboard back in December and used a bit of margin even though IRA Truck is supposed to be usable in an IRA account.

I have been paying better attention to my purchases since then to keep out of trouble. Perhaps when I get this set up with IB and run it with BrokerTransmit like I do for one of my other strategies I won’t run into that issue any more. Thanks @MatthewKlein, nice work.

1 Like
#5

Nice addition - the more data there is (especially graphic format as below), the better.
Will you be adding the leverage stats to the leaderboard/grid, inc sort-order dropdowns, this would be good for [potential] investors.

Leverage
Leverage.jpg827×421 50 KB

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#6

How the leverage helps subscribers evaluate a strategy?

#7

Well @Swing-Trader, I suspect the higher the leverage the greater the chance for a major drawdown if a trade goes bad.

There have been many strategies that have used an incredible amount of leverage and showed incredible gains over a short to mid term period but over the long run those strategies could suffer great losses if the market turns on them.

Its just a risk factor. Investors looking at high win rates will hopefully realize the strategy they subscribed to can in fact be very risk even with high win rates.

For example, shorting naked puts has an incredible risk factor but can show an incredible win/loss ratio given a bull or sideways market.

2 Likes
#8

Higher leverage = greater risk of system failure, especially so if the system doesn’t employ fixed stops, spends a lot of time in the market, and/or adds to losing positions.

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#9

2 strategies has the same equity, trading same instrument.

Strategy A buying with no SL and sing the leverage: 25.
Strategy B selling with tide SL and sing the leverage: 30.

The market was crashed after they opened trades. Which one is better?

#10

All other things being equal lower leverage is better. You have made a scenario where there are three major things not equal - leverage, market direction, and stop loss… So B is going to be better, but it seems like a mostly off topic question. Getting market direction right is going to do more for you than anything else, but it is impossible to rely on 100%. Next important in my book is leverage. Now with 25 and 30 times leverage they are pretty similar. Either one would go broke from a 4% decline in the underlying. Stop losses are important too, but only helpful when markets are liquid and open. So obviously B is the better choice here. No one is saying leverage usage is the only thing to consider, just something else that is to be considered and is very important.

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#11

So, the profitable strategy is the low DD, low leverage but high return one.

My suggestion for seeking for a strategy with following criteria:

DD <20%
Leverage <35
Return > 3 times of DD

Is it OK?

#12

Too subjective and dependent on appetite for risk, which varies widely from trader to trader.

My ideal:
DD < 10%
Leverage < 4x
Annulalized Rtn > 3 x DD
Min 6 Months Record (Ideally > 12m)
High Sharpe/Sortino Ratio
Low Correlation to S&P

There are a few strats which qualify.
Check Leaderboard/Grid on C2

1 Like
#13

For what it’s worth, I think higher leverages (within reason) like 4-10+ could be OK as long as there are some strict qualifiers in place: use of fixed stops and/or very little time in market and/or use of a hedge and/or no adding to losing positions.

All futures and forex strategies will have higher leverages, unless they are traded extremely conservatively.

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#14

@fiveHedged: clarifications about your list

  1. Annulalized Rtn > 3x Leverage
    Does this mean, that the CAGR (say 20%) is > 3x the leverage (say 4.0) so for this example 20 > 12. it’s confusing because strictly, CAGR and leverage are both percentages, so 20% return is 0.20 not 20, and CAGR is almost never going to be more than leverage (say 1.0)

  2. High Sharpe/Sortino Ratio
    I’m guessing this means “High Sharpe & Sortino Ratios” and not a new metric of the Sharpe/Sortino (Sharpe divided by Sortino) ratio.

With those clarifications, you list makes good sense.

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#15

My apologies (my bad for using mobile device / not double-checking what I wrote).
I meant:
Annulalized Rtn > 3 x DD

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#16

Except hedging or adding trades after moved SL to BE.

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