Hi, It's very hard to understand the system's logic only by numbers. But as a matter of fact you identified the problem already: when you're testing long only, the shorts are skipped, thus it'll result in a very different equity curve as compared to the result when trading long and short together. So far, if everything went right, you just figured out the difference of trading a long-only system and a short-only system.
If trading stocks, one might consider the long-side only because the indices and stocks sort of have a long-bias. In order to smoothen your equity curve, you might want to combine a short and a long system. The result is something like you're showing here. It'll pretty much enable you to make money in both bull and bear markets and ideally smoothens out the equity curve and reduces drawdowns and flat periods. Looks good to me if your coding has been right and doesn't look into the future. Always: CAR/MDD ratio: above 1,5 over 10 years time is outstanding, as it's a risk adjusted measure, it'll equal/weigh up profits versus losses|drawdown and will not consider "net profit only" To sum it up: the more trades you have, the longer your backtesting period is, the higher your CAR/MDD ratio: the better your system. Don't forget to include commissions/ spreads, anyhow. They might deteriorate your big picture. Especially with mid-caps. A good custom backtest metric might be a combination of number of trades and CAR/MDD, so to say, make 50 Trades per year and still give a CAR/MDD ratio above 1. Greetings M From: [email protected] [mailto:[email protected]] On Behalf Of Ron Sent: Donnerstag, 22. Juli 2010 06:31 To: [email protected] Subject: [amibroker] Backtest Report Long/Short trades columns? I have a strategy that over time is either long or short but not both at the same time. I'm having difficulty understanding the Long and Short trades columns in the back test report when I run the back test in Long and Short mode. Long only backtest gives (Net Profit 458.76%) Initial capital 100000.00 100000.00 100000.00 Ending capital 558757.12 558757.12 106586.98 Net Profit 458757.12 458757.12 6586.98 Net Profit % 458.76 % 458.76 % 6.59 % Exposure % 38.28 % 38.28 % 0.00 % Net Risk Adjusted Return % 1198.47 % 1198.47 % N/A Annual Return % 30.78 % 30.78 % 1.00 % Risk Adjusted Return % 80.42 % 80.42 % N/A Short only backtest gives (Net Profit 75.89%) Initial capital 100000.00 100000.00 100000.00 Ending capital 175889.18 106586.98 175889.18 Net Profit 75889.18 6586.98 75889.18 Net Profit % 75.89 % 6.59 % 75.89 % Exposure % 28.44 % 0.00 % 28.44 % Net Risk Adjusted Return % 266.88 % N/A 266.88 % Annual Return % 9.21 % 1.00 % 9.21 % Risk Adjusted Return % 32.38 % N/A 32.38 % The Long & Short backtest gives, Initial capital 100000.00 100000.00 100000.00 Ending capital 921758.81 712441.67 315904.12 Net Profit 821758.81 612441.67 215904.12 Net Profit % 821.76 % 612.44 % 215.90 % Exposure % 66.78 % 38.28 % 28.50 % Net Risk Adjusted Return % 1230.56 % 1599.91 % 757.56 % Annual Return % 41.40 % 35.84 % 19.65 % Risk Adjusted Return % 62.00 % 93.62 % 68.96 % Notice the Long Net Profit is 612.44% and Short is 215.90% which is quite a bit different then when I ran them independently. Other columns are different as well but I'll focus on Net Profit % for now. I expect there is some compounding thing happening here but if someone asked me I couldn't explain it. Does anyone out there have a explanation. Thanks in advance, Ron
