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Old 08-15-2010, 11:30 PM   #1
werido
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Default cumulative profit and max drawdown in percent

Hi,

What amount does the results from a strategy analyzer displayed in percent (as opposed to currency) refer to. I can't seem to find what number the percent results refer to. So, for example, if the max drawdown is 4.10% and and the cumulative profit is 4.75%, what initial investment is NT7 assuming?
In currency display, there doesn't need to be an initial investment stated to see how much money the program profits and draws down, but what does the percent display go on?

I read the description in the help guide but I don't under stand how the percent drawdown can be the same when starting the analyzer from way before the max drawdown in cumulative profit and when starting it right before the max drawdown in cumulative profit. So if I start the analyzer so that the cumulative profit reaches 10,000 and then the drawdown is 1,000 making the cumulative profit 9,000, the strategy analyzer doesn't seem to show the percent drawdown any different from if I started the analyzer so that the cumulative profit only reaches 2,000 in cumulative profit before the drawdown happens. How does it calculate the percent profit and percent drawdown?

Thank you very much.
Last edited by werido; 08-16-2010 at 04:25 AM.
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Old 08-16-2010, 06:07 AM   #2
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Hello werido,

Max. Drawdown will be calculated as per the maximum/minimum amount of funds you have in your account. It will be calculated the same for percent and currency. Please see the link below under 'Understanding Max. Drawdown'.
http://www.ninjatrader.com/support/h...efinitions.htm

You can find how Cumulated Profit is calculated under 'Understanding Cumulated Profit'.
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Old 08-16-2010, 12:01 PM   #3
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I'm just backtesting, there are no funds in that unless....is there a default amount that NT7 uses for initial investment when backtesting?
I notice in the trades column of the strategy analyzer results that even the first trade shows a percent profit/loss. But what is that based on? How can a first profit of $300 be 1% if there is no initial amount?

Thank you.
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Old 08-16-2010, 12:25 PM   #4
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Hello werido,

The Max. Drawdown will use the highest Cumulative PnL - lowest Cumulative PnL during backtesting.

Check the Trades-tab in the Strategy Analyzer and set it to Currency or Points. Get the higest positive Cum. profit and deduct the highest negative Cum. profit to get the Max. Drawdown.

It does not seem to use a default initial amount - when I test different backtests, I calculate a different account cash value each backtest.
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Old 08-16-2010, 12:30 PM   #5
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I know, I understand the currency value, but the % setting doesn't make sense to me yet. How can the first profit/loss be a percent increase/loss? What is that value the percent of?
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Old 08-16-2010, 12:38 PM   #6
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It uses the Backtest account - unfortunately it is unknown what funds it will hold and cannot be configured.
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Old 08-16-2010, 12:41 PM   #7
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Well how can I compare which strategy has a better drawdown using the percent? What does that value mean? Is it just total randomness?
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Old 08-16-2010, 12:44 PM   #8
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Yes, I suggest to use the Points or Currency value as per Max. Drawdown.
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Old 08-16-2010, 12:46 PM   #9
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But the percent value is consistent every time I run the backtest for that same strategy. So it can't be completely random if it's consistent like that
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Old 08-16-2010, 12:53 PM   #10
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Yes, I see. However if you backtest a different instrument with the same strategy - do you notice a difference?
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Old 08-16-2010, 01:06 PM   #11
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yes, I get a completely different percent drawdown when using the same parameters and strategy on a different instrument. Please help me understand where the percent comes from. How can it be consistent every time if it's based on a random initial capital?
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Old 08-16-2010, 02:49 PM   #12
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weirdo, I believe the percent values from the backtester are based on the trade's performance. If it is a long trade, the calculation is as follows (exit price - entry price) / entry price * 100 = % gain/loss.

Please see the attached screenshot for how I verified this. The entry for a long trade was 80.86 and the exit was 81.14 for a profit of 0.35%
Code:
(81.14-80.86) / 80.86 * 100 = 0.3462%
0.3462% rounds to 0.35%, and for the second (short) trade:
Code:
((81.15 - 81.23) / 81.15) * 100 = -0.0985828712%
-0.0985% rounds to -0.10%.
Attached Images
File Type: png trades.PNG (7.3 KB, 35 views)
Last edited by NinjaTrader_Austin; 08-16-2010 at 03:03 PM. Reason: clarify second calculation
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Old 08-16-2010, 03:21 PM   #13
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Thank you very much!
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Old 08-16-2010, 03:56 PM   #14
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You are very welcome. Please let me know if you have any other questions.
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Old 10-16-2012, 06:13 PM   #15
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Default cumulative profit

Hi Austin,

I wonder if the the figure "Cumulative Profit" is the determining figure for considering the
"real" return in percentage of a backtest strategy as there is no indication to calculate the return using the "Total Net profit" because of a missing reference parameter (e.g. buying power, account size). How does the "Cumulative profit" is defined or better calculated or in other words is the "Cumulative Profit" a significant figure regarding the performance of the backtest?

Many thanks.

Cheers!

Rob
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