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Backtesting - Sharpe Ratio
Started:October 30th, 2010 (10:29 AM) by Laibe Views / Replies:3,296 / 5
Last Reply:October 31st, 2010 (09:54 AM) Attachments:0

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Backtesting - Sharpe Ratio

Old October 30th, 2010, 10:29 AM   #1 (permalink)
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Backtesting - Sharpe Ratio

I'm currently playing with the backtesting feature of NT and found this Sharpe Ratio
Sharpe ratio - Wikipedia, the free encyclopedia

Investopia :
Investopedia explains Sharpe Ratio
The Sharpe ratio tells us whether a portfolio's returns are due to smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. A negative Sharpe ratio indicates that a risk-less asset would perform better than the security being analyzed.

sharp ratios > 1

are good, the higher the Sharpe ratio number the better, but how high should it be in order to trade the strategy long term profitable? What are the Sharpe Ratios of your Backtested Strategies?

My Best result at the moment : 5,1

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Old October 30th, 2010, 10:29 AM   #2 (permalink)
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Old October 30th, 2010, 02:40 PM   #3 (permalink)
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If your strategy is not over-fitted, 5.1 is a great result !

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Old October 30th, 2010, 05:43 PM   #4 (permalink)
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I agree with sam. Also look at expectancy. But the main thing is to include a large enough sample size and to make sure you are not overly curve fitting to past historical data, so make sure and perform an extensive forward test and compare the result sets.


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Old October 31st, 2010, 05:55 AM   #5 (permalink)
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OK thanks! The Expectancy sounds good, didnt know it.

I have to admit that its a result with MedianRenko, as i read on the board they are not suited to backtest .
Going to test the BetterRenkos by the way do you have experiences with backtesting renko charts?


Ok Results with BetterRenkos are horrible , next step is to test simulated with medianrenkos...

Last edited by Laibe; October 31st, 2010 at 07:42 AM.
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Old October 31st, 2010, 09:54 AM   #6 (permalink)
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If your strat uses lots of indicators, crossing and whatnot, then the BetterRenko is probably giving you a good picture of what to expect. MedianRenko simply doesn't work in strats, at least not mine.

Interestingly, native NT7 Renko can have merit in strats that don't use MA based indicators. I'm not sure why, however. Range bars, too, are well suited to certain strats.

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