Questions on Portfolio Tester

Questions about MultiCharts and user contributed studies.
DukeNukem
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Questions on Portfolio Tester

Postby DukeNukem » 16 Jan 2012

See the attached pic highlighting my questions. How is the "Account Size Required" calculated? And is there a way to circumvent required account size in live trading perhaps by trading mini/micro futures instead of full sized contracts? Also does the portfolio tester include average annual % return or is there plans to include this? Thanks

-Andrew
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Henry MultiСharts
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Re: Questions on Portfolio Tester

Postby Henry MultiСharts » 18 Jan 2012

DukeNukem wrote:See the attached pic highlighting my questions. How is the "Account Size Required" calculated? And is there a way to circumvent required account size in live trading perhaps by trading mini/micro futures instead of full sized contracts? Also does the portfolio tester include average annual % return or is there plans to include this? Thanks

-Andrew

Hello Andrew.
Account Size Required-the amount of money you must have in your account to trade the strategy. The Total Net Profit should always be compared with Account Size Required: the bigger the net profit compared to the Account Size Required, the better the return on investment will be.
Note: The absolute value is the positive equivalent of any number whether it is positive or negative. Account size required is only applicable when testing strategies that buy or sell futures contracts because the margin is specified in a per contract/share basis in the costs tab when formatting strategies."

Return on Account - the sum of money you would make compared to the sum of money required to trade the strategy, after considering the margin and margin calls. This value is calculated by dividing the net profit by the account size required. For leverage trading this value is more important than the Total Net Profit (e.g., buy or sell futures contracts or stocks on margin). When trading using leverage, you must a sizable margin deposit. The margin size is a certain percent of the overall transaction cost. In addition, when trading on leverage, you need sufficient money to counteract equity dips - the same as in futures and stock trading is named margin calls."

For "average annual % return" please have a look at Periodical analysis -> Annual returns and drawdowns. Is this the type of report you need?

DukeNukem
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Re: Questions on Portfolio Tester

Postby DukeNukem » 18 Jan 2012

Hi Henry Thanks for the reply. Maybe I am a bit of a noob to futures trading. May I ask, if you buy for example, 2 futures contracts each which require 5,000 overnight margin - how is this translated into money you need into your account? If the contract value value doesn't change, do you need $5,000 min. free equity (margin)in your account overnight (i.e. $5000 minimum), or $10,000 min. free equity because you're holding both? i.e. how does the margin required translate into actual money you need in your live futures account when holding more than one futures contract?

Also I looked at the annual periodic analysis but didn't see an average annual return %. I don't know if this percentage is included in Portfolio Tester but I think it would be a very useful addition if it's not there.

Thanks

Henry Multicharts wrote:
DukeNukem wrote:See the attached pic highlighting my questions. How is the "Account Size Required" calculated? And is there a way to circumvent required account size in live trading perhaps by trading mini/micro futures instead of full sized contracts? Also does the portfolio tester include average annual % return or is there plans to include this? Thanks

-Andrew

Hello Andrew.
Account Size Required-the amount of money you must have in your account to trade the strategy. The Total Net Profit should always be compared with Account Size Required: the bigger the net profit compared to the Account Size Required, the better the return on investment will be.
Note: The absolute value is the positive equivalent of any number whether it is positive or negative. Account size required is only applicable when testing strategies that buy or sell futures contracts because the margin is specified in a per contract/share basis in the costs tab when formatting strategies."

Return on Account - the sum of money you would make compared to the sum of money required to trade the strategy, after considering the margin and margin calls. This value is calculated by dividing the net profit by the account size required. For leverage trading this value is more important than the Total Net Profit (e.g., buy or sell futures contracts or stocks on margin). When trading using leverage, you must a sizable margin deposit. The margin size is a certain percent of the overall transaction cost. In addition, when trading on leverage, you need sufficient money to counteract equity dips - the same as in futures and stock trading is named margin calls."

For "average annual % return" please have a look at Periodical analysis -> Annual returns and drawdowns. Is this the type of report you need?

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Henry MultiСharts
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Re: Questions on Portfolio Tester

Postby Henry MultiСharts » 20 Jan 2012

DukeNukem wrote:Hi Henry Thanks for the reply. Maybe I am a bit of a noob to futures trading. May I ask, if you buy for example, 2 futures contracts each which require 5,000 overnight margin - how is this translated into money you need into your account? If the contract value value doesn't change, do you need $5,000 min. free equity (margin)in your account overnight (i.e. $5000 minimum), or $10,000 min. free equity because you're holding both? i.e. how does the margin required translate into actual money you need in your live futures account when holding more than one futures contract?

Also I looked at the annual periodic analysis but didn't see an average annual return %. I don't know if this percentage is included in Portfolio Tester but I think it would be a very useful addition if it's not there.

Thanks

In case your symbol settings are correct-Portfolio values are translated into real money.
Then your "Account size required" is equal to the real account requirement.
Please keep in mind that account multiplication (in case of presence) is not taken into account.

DukeNukem
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Re: Questions on Portfolio Tester

Postby DukeNukem » 21 Jan 2012

But I still don't understand how is the acct. size required calculated, exactly? Which variables are incorporated from symbol settings? What is the formula? You said it was only applicable to futures markets? What is "account multiplication"?

Also, you didn't mention average annual return / CAGR (useful especially testing many years of data)? You don't intend to include this in portfolio backtester? I have not seen this statistic. I think it would be useful, for what it's worth.

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Henry MultiСharts
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Re: Questions on Portfolio Tester

Postby Henry MultiСharts » 23 Jan 2012

DukeNukem wrote:But I still don't understand how is the acct. size required calculated, exactly? Which variables are incorporated from symbol settings? What is the formula? You said it was only applicable to futures markets? What is "account multiplication"?

Also, you didn't mention average annual return / CAGR (useful especially testing many years of data)? You don't intend to include this in portfolio backtester? I have not seen this statistic. I think it would be useful, for what it's worth.

Account. size required=MinCloseToCloseDrawDown + Margin * MaxNumContractsHeld.

MinCloseToCloseDrawDown - the maximum loss drawdown, from the previous highest equity run-up, closed trade to closed trade looking across all trades, during the specified period. If a new closed trade equity run-up high occurs we reset the low equity value to 0, looking for the next maximum drawdown from that point."

Max # Contracts Held - the maximum number of contracts held at any one time.

By account multiplication I mean "buy 1 in MultiCharts=buy 10000 at broker (for ex. for some FOREX brokers)"

To recalc the chart price into the account money you need to multiply the chart price by Big Point Value (Quote Manager->Edit symbol->Settings).

Average annual % return and CAGR features are not currently in our "to do" list.
Please submit a feature request to the Project Management of our web site so other users can vote for it: https://www.multicharts.com/pm/
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Ulich05
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Re: Questions on Portfolio Tester

Postby Ulich05 » 11 Nov 2012

Henry MultiСharts wrote:MinCloseToCloseDrawDown - the maximum loss drawdown, from the previous highest equity run-up, closed trade to closed trade looking across all trades, during the specified period. If a new closed trade equity run-up high occurs we reset the low equity value to 0, looking for the next maximum drawdown from that point.


Wouldn't you rather take the worst of either max intraday drawdown, max trade close to close drawdown, the total of largest string of losing trades or the total of the largest string of losing intraday drawdowns net of closed trades + (margin * max contracts held)?

you'll still get a margin call if an intraday draw down exceeds either the initial or maintenance if the initial is all you have in an account

ex: account is funded w/ 5k and you're trading the mini w 5k maint.
intraday you drawndown 5,500 you'd get called even if the trade were to rally and you'd only lose $100. MC seems to report an account size required in that case of $100 which is lol

your account size required is actually 5500+comish on a 1 lot in that case.

ex: account funded w/ 5k you trade 5k maint on the mini on 1 lot,
trade 1: intraday draw is 1k close the trade at break even
trade 2: intraday draw is 500 close trade for 100 loss
trade 3: intraday draw is 200 close trade for 100 gain

in that case you need 5100 (maint + loss as maint covers drawdowns) + comish on 3 RTs

i bring this up bc ive got a system that trades a synthetic instrument that takes an initial core position and will trade in and out around that core. It exits the core (A in the chart) if the additional position(s) taken after the core + the core combined are break even or better.

If the combined core + others are not yet profitable on a sell signal but the additional positions are, the additional positions exit. That way it continuously chops down the cost basis of the initial core position.

in the chart, A is the core, B,C,D are positions traded around the core.

MC seems to only count a trade as "closed" if the initial position (A) is closed out and disregards the B,C,D getting closed out.

in the attached pics notice the discrepancies between the optimization report and the strategy report. ie net profit of "4646.50" and total trades of 11

in reality net profit is 34,391.33 w/ 42 trades

the backtest was on a $10k account, notice the strategy drawdown is -$33,578.16. MC reports an account size required of $400.03 which is just the max trade close to close. That doesn't do us any good bc an account of 43,578.16 @ minimum is needed for this system. Notice close to close of -400 is simply due to the initial position being close out at a loss as the additional positions taken around that core are all profitable resulting in a net profitable "position" even tho there could have been tons of trades that occurred in the meantime. see the pic showing the trades on the chart
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Last edited by Ulich05 on 11 Nov 2012, edited 2 times in total.

Ulich05
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Re: Questions on Portfolio Tester

Postby Ulich05 » 11 Nov 2012

chart
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