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Strategies & Market Trends : Technical Analysis - Beginners -- Ignore unavailable to you. Want to Upgrade?

To: big run who wrote (9455)	2/18/1999 8:42:00 PM
From: Richard Estes	Read Replies (2) \| Respond to of 12039

For system testing, I never set a stop. After you turn 10,000 into millions the drawdown figure is a small percentage of your gains. The largest MAE was 7.38 points for a 1.4 million loss. It isn't reality when you are putting 14M is it? We do not reproduce reality with no stops, etc. we compare against other systems on an even basis. I have never stayed around SC long enough to know what you get. In MSWIN, we get each trade listed and daily equity numbers, all need to be compared. I look at everything. I pull it out and use it from time to time. It is not prime as it was. ====================================================== System Close Drawdown. The largest equity dip (relative to the initial investment) based on closed out positions. This shows the maximum distance a closed-out position fell below the initial investment amount. System Open Drawdown. The largest equity dip (relative to the initial investment) based on open positions. This shows the maximum distance the equity line fell below the initial investment when a position was still open. Max Open Trade Drawdown. The largest equity dip experienced by any single trade (relative to the trade's entry price). A trade's Open Position Drawdown is shown in the Trade Detail report (Trade Detail Report). Profit/Loss Index. This index compares the Amount of Winning Trades to the Amount of Losing Trades. The Profit/Loss Index combines Winning Trades and Losing Trades into one value that ranges from -100 (worst) to +100 (best). A negative index value indicates that the trading system produced a net loss. The higher the index value, the higher the Amount of Profitable Trades compared to the Amount of Losing Trades. Index Profit/Loss +100 High Profits/No Losses +50 Profits > Losses 0 Profits = Losses -50 Profits < Losses -100 No Profits/High Losses Reward/Risk Index. This index compares risk to reward. In this index, risk is defined as the System Open Drawdown (i.e., the lowest point of the equity line below the initial investment). Reward is defined as the Total Net Profits (i.e., the final point on the equity line). The Reward/Risk Index combines Reward and Risk into one value that ranges from -100 (riskiest) to +100 (safest). A Reward/Risk Index value of zero means that risk and reward exactly offset each other. Index Reward Risk +100 High None +50 Medium Medium 0 None None -50 Low Medium -100 Very Low High Buy/Hold Index. This index shows the percentage of the system's profits as compared to a buy and hold strategy's profits. A value of "-50" means that the system's profits were one-half (i.e., 50%) of the buy/hold's. A value of "25" means that the system's profits were 25% greater than the buy/hold's. A value of "0" means they were equal. Ideally you want your system test to produce higher profits than a buy/hold strategy (i.e., Buy/Hold Index is greater than zero); otherwise the trading may not be worth the time and effort. MAE. The Maximum Adverse Excursion is the worst intraday price move against a position, measured from the entry price. This risk measurement was developed by John Sweeney of Technical Analysis of Stocks & Commodities magazine.