Getting Trade results from a trading system
Various programs exist to take market data and plot it in all the usual ways.
Some of these also allow indicators and trading systems to be built and tested.
After building a system and testing it, many of these programs provide various
measures of performance - drawdown, win/loss ratios, etc.
The validity of these performance measures depends in part on how much historic
data is available and how many trades were generated. We need enough trades
to be statistically meaningful. Often there are too few trades to give real
meaning to the performance results. There are varying opinions as to how many
is enough.
Even if the performance measures are accurate a few numbers do not describe
the shape of the ending equity and drawdown curves.
These programs do not show what would happen if these same trades were randomly
combined in hundreds of combinations. They can be overly optimistic about
drawdown because not enough of the possible combinations were covered. If
the trade by trade data from the system results is fed into TradeSim we can
now see what would result if these trades were combined in many combinations,
and also find optimum risk levels.
It is useful to use Tradesim to further analyze the results of system tests.
Here is the method of doing so. This may be done with Metastock, Tradestation
and other programs.
The plan is to:
1. Design a strategy and test it.
2. At the end of the test export the list of trades to excel
and select the column for gain or loss from each trade. Tradestation
makes a couple of export files available so you need to get the right one
- it will have a column of profits and losses. (Metastock has something
similar - see below)
3.Copy this list of returns to a text file. Use notepad or word pad - a
plain text file is needed not a word file. Add a header to the top
of the file containing 'Return Data', a description and units then save
the returns file. It will look something like this:
Return Data
System 03 with $9.60 commission
Dollars
140.4
127.9
-59.6
215.4
-84.6
190.4
-59.6
...
4. Use this file as input to Tradesim.
Issues with older versions of Metastock
Older versions of Metastock disappointingly do not have any export capability
so you must copy the data with cut and paste. Here is the method to get trade
by trade returns from the Metastock system test results. (The screen shots
here are from Metastock 6.5)
Display the system report
Hold the shift key down while selecting the whole table either with the up/down
keys or the mouse. (Control-A does not work.)
Now press Control-Insert to copy the table to the clipboard. (The right mouse
key will not work for this.)
Paste the clipboard into a blank spreadsheet.
Now copy the profit column from the spreadsheet to a text editor and proceed
with step 3 above. Note the first value is not used since it is only an initial
entry and not a trade.
Copyright 2002, Larry Sanders
This web site is for the
education of traders. The discussions here are not to be considered a recommendation
of any trading strategy, just an information resource to aid the trader in
making his or her own informed decision regarding risk control.
Last
update 2002.12.12