Thread: How to Evaluate Trading System Performance?

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  1. 02-03-2016, #1
    Antanykki
    Join Date Dec 2014
    Posts 0

    Default How to Evaluate Trading System Performance?

    I went through systematic FX fund disclosure doc. It went live quite recently - in Feb 2013. As on June 2013,

    Style: High Frequency Trading Algorithm
    Instrument: EUR/USD
    Profit Factor: 6.48
    Hit (Success) Ratio: 94.34%
    Expectation: +13.48%
    Target Annual Returns: 18-22%
    Max DD: 0.30%
    Total Trades Closed: 106
    Total Days Completed: 129 (incl. Sat & Sun)
    No loosing month or week
    Fund Manager has 'skin in the game' i.e. has personal funds invested
    Management Fee: 0%
    Profit Participation: 50% with high-watermark and claw-back provisions
    No min. lock-up periods
    No side-pockets
    No redemption/subscription loads
    No gate provision or withdrawal restriction
    Fund Manager is less than 30 years old
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  2. 02-04-2016, #2
    AnthonyhiSk
    Guest

    Default

    I'm confused. Did you start this fund or are you thinking of investing in it?

    Just glancing at the stats you gave throw off red flags. TThere is no indication of whether or not this fund will be long-term profitable. A 94% success ratio is great, but only over about 100 trades and only over the past four months?? This data is not statistically significant.

    Since the fund is still very young, you should look at the simulated performance over the past 5-10 years. There are bazillions of metrics to choose from, but you basically want to find out this info:

    1. how profitable is it? Could use cumulative annual return, average annual return, or net return
    2. how risky is it? Could use maximum drawdown, risk-adjusted return, exposure %, or ulcer index
    3. how consistent are the returns? Could use K-factor or a table of monthly returns
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  3. 02-05-2016, #3
    Anthonytype
    Join Date Jan 2015
    Posts 0

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    with the best of respect come back in 5 years dude ..........I need a track record of investing in the system and you as a sustainable business .....not simulation or promises

    no offence intended - just good business principles
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  4. 02-06-2016, #4
    Antoshkawes
    Guest

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    The maths don't add up. A targeted annual return of only 18-22 % with a hit rate of 94 % and profit factor > 6. Something terribly negative is missing like reversion to mean i.e. current statistics are overly positive.
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  5. 02-08-2016, #5
    aqiqieoirz
    Join Date Jun 2014
    Location Philippines
    Posts 0

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    I checked with the FM. The figure (annual return) currently stands at 25.42%. The FM prefers to "understate" annual returns rather than "overstate".
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