Exclude Trades From Performance Calculation
Author: gbullr
Creation Date: 8/12/2013 8:29 PM
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gbullr

#1
Eugene or Cone.

Is there a way to exclude the best x trades from the performance calculation. Is this the "Use worst trades in simulation checkbox?"


I ask because in low turnover strategies a few of the positions may have an undue influence on optimization and so it may be better to optimize w/o those trades having an undue influence on performance.

Obvious example would be a long term strategy that told you to buy Apple in 2003, but in actuality either 1) you did not buy it because you had a couple of signals on that day and you chose another one or 2) you are running the backtest now and it skews results.

One solution that you may want to give me is to run RP mode or fixed dollar mode which is a viable solution except that if I am running a high ROE backtest for all data ( 20 years+ w/ FIDO / Yahoo Data) then there would be underinvestment in the latter years vs a pct of equity backtest and therefore one's backtest would be far from what should be expected.

As always thank you in advance for your help.

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Eugene

#2
To actually exclude trades from a performance calculation, there is a way: build your own Performance Visualizer. Although it gives the freedom to drop the best X trades, this is by no means a trivial task since still a lof of work is left afterwards to rebuild those Equity series and performance calculations. And of course, no other existing performance visualizer would benefit from this considerable effort of development.

Fortunately, I can recommend something already available to reach your objective:

1. Performance+ visualizer: Outlier trades section, "Select Net Profit" in particular. These metrics present the easiest way to evaluate a system's performance with the outlier profits removed (follow the link for more detail).
2. Monte Carlo-Lab visualizer to randomize equity or trades and thus avoid focusing on just a single backtest.

P.S. You can always find out the actual purpose of Wealth-Lab options in the Wealth-Lab User Guide (Help menu). In particular, Preferences > Backtest for "Use worst trades..."
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gbullr

#3
Thanks Eugene.

I will take a look..

Hopefully before I die I will be able to create something that withstands my own stupidity.


Best.

Thanks again.