While back testing and optimizing a battery of systems one of the most important factors in order to recognize a good and solid system respect to a poor one is obviously the equity line.
So I am wondering in your opinion which is the best indicator to use for ranking/optimization based on the sharpness of the equity line, the one the most reflect the visual analysis.
In my opinion the factors that are worth to be considered are:
profits/drawdown
(in order to avoid large drawdowns)
average trade
(in order to have a tradable system)
number of trades
(the more the better in order for the model to be statistically valid)
average bars held
(I preferred the systems that are month training more than 4,5 bars to be less dependent on the slippage)
Which formula / indicator are you using?
Thanks in advance
Best math indicator to identify a good-looking equity line
- furytrader
- Posts: 354
- Joined: 30 Jul 2010
- Location: Chicago, IL
- Has thanked: 155 times
- Been thanked: 217 times
Re: Best math indicator to identify a good-looking equity li
I'm not sure if this helps but last year, user Dru presented a way to rank optimization trials by the smoothness of the equity curve.
You can check it out at:
viewtopic.php?f=5&t=11769&hilit=optimiz ... uity+curve
You can check it out at:
viewtopic.php?f=5&t=11769&hilit=optimiz ... uity+curve
-
- Posts: 116
- Joined: 19 Aug 2012
- Location: San Francisco
- Has thanked: 23 times
- Been thanked: 30 times
- Contact:
Re: Best math indicator to identify a good-looking equity li
I like the KRatio posted by Jdog: http://www.multicharts.com/discussion/v ... =5&t=17882Which formula / indicator are you using?
Re: Best math indicator to identify a good-looking equity li
I like both the ideas, in particular the StdDev of the equity line.
One of the things that usually is not part of the optimization process is the number of the trades... I am thinking to express it with the formula like: (NumberOfTrades/NumberOfBars) so the higher the better, what you think about it?
(netprofit / EquityCurveStdDev) * (NumberOfTrades/NumberOfBars)
But I'm still searching for a valid solution to take in consideration even the average trade.
Any Idea?
One of the things that usually is not part of the optimization process is the number of the trades... I am thinking to express it with the formula like: (NumberOfTrades/NumberOfBars) so the higher the better, what you think about it?
(netprofit / EquityCurveStdDev) * (NumberOfTrades/NumberOfBars)
But I'm still searching for a valid solution to take in consideration even the average trade.
Any Idea?
- JoshM
- Posts: 2195
- Joined: 20 May 2011
- Location: The Netherlands
- Has thanked: 1544 times
- Been thanked: 1565 times
- Contact:
Re: Best math indicator to identify a good-looking equity li
There are multiple documented in this thread, but I can't say which one is "most valid" or "the best" -- that's likely too personal.But I'm still searching for a valid solution to take in consideration even the average trade.
Any Idea?