Analysis of Futures Trades 2005

[muchell]

I have done some analysis of the Futures Trades for 2005 using MTP EOD.

Phillipes data (see prior thread) from 10/1/05 to 4/10/05 was firstly included. Scheme 4 data used. One trade was taken out and 2 minor adjustments because of perceived inaccuracies leaving 39 trades. Phillipe did not include some energy trades during this period because of risk.

Matt Bowen’s trades were then added from10/10/05 to 7/02/06. Matt’s data was ‘taken back’ to 1 contract per trade for consistency. One trade was left out HO 200512 ($13,220) 1/11/05 because I believed the risk was too great on this trade and inconsistent with the rest. Total 43 trades.

The data were analysed in MSA. No slippage added because the data is actual trades. No commission because Matt had already taken it out and because it was for multiple contracts it will have covered Phillipes trades – ok so not dead accurate.

The data input to MSA was Profit per 1 contract and actual Risk per 1 contract, entered in trade sequence.

Three outputs will be shown. Results for 1 contract as entered: Using position sizing Fixed Fraction of 2% on $50,000 account: Optimised fixed fraction maximised for net profit with max drawdown limited to 20% and trades taken in sequence.

Hope this does not cause too much controversy!

Kelvin

[muchell]

Analysis Using position sizing Fixed Fraction of 2% on $50,000 account

Kelvin

[muchell]

Optimised fixed fraction maximised for net profit with max drawdown limited to 20% and trades taken in sequence.

The End
Kelvin

[muchell]

oops folks stuffed up.

Here is the Analysis Using position sizing Fixed Fraction of 2% on $50,000 account.

Kelvin

[Angel]

Hi Muchell, hi all,

First I would like to thank you for sharing your analysis results : it's very kind of you :)

I bought MSA 2.01 too so for taking it in hand seriously, would you mind to post on the forum the entire of your trades list compiled in the excel sheet.

Thanks

Have a good trading all,

Rgrds

Angel

[Matt Bowen]

Hi Kelvin,

Great work! I'm not sure I understand the drawdown from about trade # 36 all the way to Trade # 53... are these Philippes' trades? The reason I asked because my Max consecutive loss was 5 on the trade results for the MTP risk report.

I have exported my trade results from MSA and attached them as a .zip to this e-mail.

Do an MSA run with these results on 1 contract and then do it with position sizing...Wait until you see these results!!!

In other words, when Kelvin has this done it will show what the portfolio would have looked like if we did psoition sizing from the first trade.

Thanks Kelvin...

[muchell]

Matt, Thanks for the data. In regards to the run of losses. Philllippe's last 5 trades from 16/9/05 to 4/10/05 were losses. Then my read on your data is that the first 8 trades from 10/10/05 to 3/11/05 were also losses. I did notice that your MSA report yesterday showed only 5 consecutive. There may be a discrepancy between the list of trades shown on your daily report and the data entered into MSA. How-some-ever, it still looks pretty darned good with 13 consecutive losses and something we can expect to occur.

I'll do some more fiddling.

Cheers Kelvin

[muchell]

I have reordered the data (for Matts trades), that is the order in which trades are entered based on the file Matt sent. This gives the true order as opposed to the order I used from his daily report.

The results are very interesting. I will present the same output as before including an additional one showing increasing the position size by 50% based on an equity cross above the 8 Trade moving average.

I will include my data file, so you can use it yourself, pull it to bits or whatever.....

Lastly I have to thank Steve and Matt for pushing Position sizing and also informing of MSA software. To think I've had von Tharps book for a couple of years and thought sounds good, yeah I'll get round to using his ideas soon once I've sussed out a good (perfect!) system. Wasted a couple of years of my life haven't I..........

Lastly, I have no affiliation to MTP. I am a 2 month old owner of EOD and very happy to be so. 'nough said.

Kelvin

[muchell]

$50,000 account 2% Fixed Fraction

[muchell]

Optimised Fixed fraction. Trade limit 50 trades. This is scary

[muchell]

Increase position sizing by 50% when equity crosses above 8 trade moving average. If I didn't say before, the max drawdown allowed on all these analysis is 20%.

[muchell]

G'day
The data file I have used in MSA. Look folks I know some of you are going to go through it with a fine tooth comb. All I ask is if you find a major mistake say something so we can all benefit, but if I have one trade out of order or put Risk $870 instead of $860, please don't pull the whole ediface down...I've seen it happen too often and no one benefits.

See ya
Kelvin

(nationality identifiers attached)

[Angel]

Hi Kelvin, hi all,

Many thanks for sharing it, it's very kind of you :D

Last question about your test. If i'm right, your analysis seems to be done on the current trade sequence.

Did you do the same test through a Montecarlo analysis by randomizing the trade sequence ?

All the best,

have a good week end all,

Rgrds

Angel

[muchell]

Hello Angel,

Yes I did Montecarlo analysis and the trades stand up to scrutiny. Now you have the data file just use your copy of MSA and go to town on analysis. I'd be interested in anything interesting you may find - in particular any anomolies as I always get edgy when I find outstanding results as in this case.

Cheers Kelvin

[mcdirt]

Muchell,

Thanks for sharing your research, all very interesting. I don't get the point of doing Monte Carlo analysis on Matt's trades as he took every single trade. As far as I'm aware, Monte Carlo is only applicable if there are more entries than you are able to trade and so the simulation does multiple runs, taking different combinations of trades each time.

If you can take all the trades, then there IS no Monte Carlo analysis bacause there is only 1 permutation - every trade is taken?

rgds McDirt

[muchell]

McDirt,
Below is a short overview of Monte Carlo.
You can do (which I have done) Monte Carlo on the trades in the database in their actual sequence, on a randomised sequence and on an increased number of trades generated from the data.

Take the 30 day trial of MSA and check things out.

ACCOUNTING FOR RANDOMNESS

Monte Carlo simulation is a way to account for the randomness in a trading parameter -- in this case, the sequence of trades. The order in which losses and gains come dictates the drawdown and thus the risk of loss . This order is random, and therefore, so is the risk of loss.

In Monte Carlo simulations, the basic idea is to take a sequence of trades generated by a trading system, randomize the order of trades, and calculate the rate of return and the maximum drawdown, assuming that x% of the account is risked on each trade. The process is repeated several hundred times, each time using a different random sequence of the same trades. You can then pose a question such as, "If 5% of the account is risked on each trade, what is the probability that the maximum drawdown will be less than 25%?" If 1,000 random sequences of trades are simulated with 5% risk, for example, and 940 of them have maximum drawdowns of less than 25%, then you could say the probability of achieving a maximum drawdown of less than 25% is 94% (940/1,000).


Cheers Kelvin

[Angel]

Hi Kelvin, hi all,

Sorry to bother you with such stupid thing :o

Concerning your trades data file, I well understand that you can lose more than your initial risk due to slippage for example.

But I really don't understand how can you lose less than you initial risk ?

For example :
- Trade number 16, you lose 550 for an initial risk of 660
- Trade number 20, you lose 430 for an initial risk of 630
- Trade number 28, you lose 790 for an initial risk of 900

Thanks for your help

Have a good week end all

Rgrds

Angel

[timo4sho]

Hi Muchell,

very interesting numbers you posted here!

Would you mind explaining what exactly you meant by "Increase position sizing by 50% when equity crosses above 8 trade moving average. If I didn't say before, the max drawdown allowed on all these analysis is 20%."?


Thanks for clearing it up!

P.S.: check your private messages ;-)

[mcdirt]

Muchell,

Thanks for the explanation. This is different from Monte Carlo sims I have done in the past (with TradeSim) with Shares where there are way too many entries to trade with a typical portfolio, the program goes through the trade database chronologically but takes different sequences of trades each time. A different approach ....

The frequency distribution is a very important tool as a way of characterizing the potential performance of a trading system. It only has relevance when trading a system using a portfolio of securities. This is because trading with a portfolio of securities no longer gives a unique outcome as it did when only trading or back testing with one security. When trading a system using a portfolio of securities the outcome of the trading system can now be considered to be a random event characterized by a discrete probability distribution function. This characteristic of a trading system is always overlooked using conventional charting packages because the system testers built into most charting packages are limited to testing a single security at the one time. Therefore the most important information useful for deducing and characterizing the performance of a trading system is lost and so the true performance of a particular trading system is never fully understood. Because TradeSim mimics the way a trading system is traded in real life the results from each simulation can be used to build up a statistical profile of a trading system. By repeatedly simulating a trading system using a random selection of securities that meet the entry date and position sizing requirements we can build up a statistical profile of a trading system based on the portfolio used.

[muchell]

Angel,
In relation to the initial risk being greater than the eventual loss. It happened this way, being a natural conservative. Philippe's trades were based on entry and exit at low or high of bar. I worked out the risk by taking a point above and a point below the bars which increased the risk, but I did not adjust the profit or loss. The numbers may not have been absolutely correct for all trades as I had to use a third party data supply (track'n'trade) to get the prices for some of the older contracts.

Cheers Kelvin

[Angel]

Hi kelvin,

Thanks for your quick reply :)

I got exactly the same results than your, post number #10 and I apply exactly the same settings with a Max contracts of 50.

Sincerely, I'm a little confused by the "Trade size limit" becoz you have to set it manually in order to find the best ratio between Return on starting equity/Max Drawdown.

When you aply the optimization feature, is the max contracts also optimized ? If yes, changing it manually wouldn't be the right thing to do !!

May be it would be a thing to ask for Mickaël R.Briant, what is the best safely way to use the trade size limit feature ?

Thanks

Rgrds

Angel

[sr100m]

Thanks to Kelvin and this thread I took the advice of the mtp guys and got MSA. It does bring trading to a whole new level. One thing that caught my attention was the ability to run Fixed Ratio (FR) position sizing. Fixed ratio is claimed to be better for small account sizes and Michael Bryant suggests on one of his websites other potential benefits
http://www.breakoutfutures.com/Newsletters/Newsletter0703.htm

I had read a bit about this in the past (book by Ryan Jones) but could not find a good way to determine the "delta" (the factor that determines at what point you increase the number of contracts you trade) until MSA and it's montecarlo engine came along.

I have taken the futures portfolio from earlier in this thread and run FR and FF analysis in MSA (v3) to see what comes out. I'd be interested in any comments and thoughts.

For anyone interested in reproducing results the settings used in MSA were $5 rt commission under 'setup' and under montecarlo analysis options 1000 analysis samples and a 99% confidence level for reporting. For optimising I limited max percent drawdown to 25% (MSA strugled to optimise FR with a 20% dd so i had to use this higher dd). Equity crossover rules were NOT applied. Unfortunately, I only realised I had used the file with the 13 consecutive loosing trades after i had done all the analysis - but for the purposes of comparing FR and FF it still works.

The 2 attached charts are optimised fixed fraction (similar to the ones posted previously) for comparison purposes

[sr100m]

Here are the charts for Fixed Ratio position sizing (as in the previous post on chart is for 50k starting equity and the other is for 100k starting equity).

A few things of interest.

1. FF gives a greater return than FR.
2. However, FR seems to use fewer contracts at a given equity level and the number of contracts does not fluctuate around as much. This potentially allows less liquid contracts to be traded and so increase the number of trades in a given period of time which would offset the lower return somewhat.

Trading fewer contracts also means you get less killed in the event of a lock limit going against you for a few days (black swans and all that!).

FR seems to provide a half way house between the 1 contract per trade approach and FF and might be a way of getting an account size up to a level
that makes FF a practical proposition - and with MSA the optimal delta and the position size for each trade can be determined.