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Van Tharp's SQN (system quality number)


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Van Tharp's SQN (system quality number)

 
 buzzsaw 
Leesburg, VA
 
Experience: Advanced
Platform: NinjaTrader
Posts: 80 since Aug 2010
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What are those failures? Will you be sharing your excel replacements?


Can you help answer these questions
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nivi
Madrid, Spain
 
Posts: 30 since Feb 2017
Thanks Given: 4
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NinjaTrader Failure:
- Optimize 30min time frame it takes the same time than optimize 1min time frame.
- When you make backtest or optimize and appears a big gap, and there was a limited entry order the entry price does not run at the opening level of the next bar.

Multicharts Failure:
- Using IB with friends and family account, only can see the accound by de "ID" like U1232123, U333444, U565656... You can't personalize the account name, for example: Paul, Enri,... Now imagine that you are working with 10 different accounts
- Using IB with friends and family account then the total money that exists in each account is not truly shown. For example, an account have 30.000€, then get lost 1.000€, logically they should be seen 29.000€, but Multicharts continues showing 30.000€

My personal excel now is only for optimization and backtest. It is simple but work just as I need.
I need SQN? I have SQN.
I do not need to see decimal numbers in the average profit.

Then I see what I want, the way I want it and without mistakes.

 
 wolfcuring 
ChangChun+China
 
Experience: Intermediate
Platform: Ninja Trader 8
Trading: Futures
Posts: 4 since Oct 2011
Thanks Given: 1
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caprica View Post
Hello. I just uploaded this to the Ninja Strategies section. It is really a unique method to optimize your strategies on.

This is Van Tharp's System Quality Number (SQN) optimizer type for NinjaTrader. Place the SQN.cs file in your Documents\NinjaTrader 6.5\bin\custom\Type directory and then exit and reload Ninja.

Here is information from Ragingbull on SQN:


The code itself was written by Pete S all credit to him.

If you want more information on the SQN (System Quality Number) or Van Tharp you can look here:
Definitive Guide to Position Sizing

To use this you need to use Strategy Analyzer and change your "Optimize on..." selection to "my system quality number". This is where you normally choose max net profit, or max profit factor, etc.

Download the file here:


Hi everybody, just following up this thread.

In Tharpe's book, he talked about the drawback of the SQN, that it can be distorted by a large number of trades. So, his remedy is to truck number above 100 to 100.

So,
If (Number of Trades >=100)

SQN =10 * Average Profit/StdDev(AllTrades)

While in this case, the favorable number of trades is only between 30 and 100. This range is quite small! And when I used SQN to evaluate the system quality, it seems to have a bias toward small trade numbers between 30-100.

How do you guys think of that? Is there a way to remedy this?

 
 asymptote 
Mississauga
 
Experience: Intermediate
Platform: Ninjatrader
Broker: GGI/ Kinetick
Trading: Emini
Posts: 9 since Nov 2017
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Interesting Point about SQN = Sharp ratio.
https://fxrenew.com/forex-blog/how-to-measure-your-trading-system-quality/

 
 
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 Shivaya 
Belfast N.Ireland and Brisbane Australia
 
Experience: Advanced
Platform: NinjaTrader
Broker: Stage 5
Trading: ES
Posts: 128 since Jun 2009
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https://www.vantharp.com/trading/april-2021-system-quality-number-report-the-sqn-report-by-van-k-tharp-phd/

Latest from Van Tharp

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Sandpaddict's Avatar
 Sandpaddict 
Vancouver, Canada
 
Experience: Advanced
Platform: Ninjatrader, MT4
Broker: IB, Global Prime
Trading: Futures CFDs
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Wow yes! Don't have time now but going to finish reading that soon.

Vans my hero!

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Sandpaddict's Avatar
 Sandpaddict 
Vancouver, Canada
 
Experience: Advanced
Platform: Ninjatrader, MT4
Broker: IB, Global Prime
Trading: Futures CFDs
Posts: 684 since Mar 2020
Thanks Given: 975
Thanks Received: 637


wolfcuring View Post
Hi everybody, just following up this thread.

In Tharpe's book, he talked about the drawback of the SQN, that it can be distorted by a large number of trades. So, his remedy is to truck number above 100 to 100.

So,
If (Number of Trades >=100)

SQN =10 * Average Profit/StdDev(AllTrades)

While in this case, the favorable number of trades is only between 30 and 100. This range is quite small! And when I used SQN to evaluate the system quality, it seems to have a bias toward small trade numbers between 30-100.

How do you guys think of that? Is there a way to remedy this?

I believe that IS the reason he designed it that way.

It is designed to be bounded.

It is like an oscillator in that sense that the numbers are RELATIVE.

Thats also what makes it so powerful as you can compare systems with a fairly tight correlation. Even in completely different systems.

But at the same time you can understand your own system and see where it lies on the SQN scale (if your have your numbers).

You can also compare your system to it's self at different time periods. Or two of your systems against each other over the same period of time. It is quite powerful.

So the point is yes you can have a thousand trades in there. It just becomes less sensitive as the trade number increases.

One way to fix that might be to examine "chunks" of trades by time. Say a rolling once a day or week or month depending on how often you trade.

From there you'll have a daily or weekly SQN that you can compare to last week or the week before. You can also add all weeks together and divided by the amount of weeks to give you the total SQN as ANOTHER way of parsing the information and to make comparisons.

Hope that makes sense and helps.

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Wikmar's Avatar
 Wikmar 
Madrid - Spain
 
Experience: Advanced
Platform: Own (more or less)
Trading: S&P500, FDAX, €/$, CL, etc.
Posts: 143 since May 2014
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The family Sharpe ratio and its extended variants (SQN, Sortino ratio, etc), and also K-Ratio, they were shot down.

https://ssrn.com/abstract=3243130

Home people force
https://wikmar.wordpress.com/
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 SodyTexas 
Austin TX
 
Experience: Advanced
Platform: Ninjatrader, Python, & R
Broker: RJO
Trading: Futures, Spreads
Posts: 421 since Sep 2013
Thanks Given: 117
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caprica View Post
Hello. I just uploaded this to the Ninja Strategies section. It is really a unique method to optimize your strategies on.

This is Van Tharp's System Quality Number (SQN) optimizer type for NinjaTrader. Place the SQN.cs file in your Documents\NinjaTrader 6.5\bin\custom\Type directory and then exit and reload Ninja.

Here is information from Ragingbull on SQN:


The code itself was written by Pete S all credit to him.

If you want more information on the SQN (System Quality Number) or Van Tharp you can look here:
Definitive Guide to Position Sizing

To use this you need to use Strategy Analyzer and change your "Optimize on..." selection to "my system quality number". This is where you normally choose max net profit, or max profit factor, etc.

Download the file here:

You are aware that this is NOT Van Tharp SQN number. The code does not even calculate R (risk per trade).

You can learn more about SQN here: https://www.youtube.com/watch?v=_icml8H98r0

Sody


"The great Traders have always been humbled by the market early on in their careers creating a deep respect for the market. Until one has this respect indelibly engraved in their makeup, the concept of money management and discipline will never be treated seriously."
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Sandpaddict's Avatar
 Sandpaddict 
Vancouver, Canada
 
Experience: Advanced
Platform: Ninjatrader, MT4
Broker: IB, Global Prime
Trading: Futures CFDs
Posts: 684 since Mar 2020
Thanks Given: 975
Thanks Received: 637



Wikmar View Post
The family Sharpe ratio and its extended variants (SQN, Sortino ratio, etc), and also K-Ratio, they were shot down.

https://ssrn.com/abstract=3243130

Wikmar. Thank you so much that was a great paper. Fantastic!

This is of course the problem us discretionary traders have as well.

It's a hidden weakness as we don't look at it like we should. Maybe thats the SQN coming through? Lol.

I really like your idea for figuring out MaxDDs impact and incorporating it in with DDArea for the total percentage of drawdown...

"The weight p is obtained by a rule of three: DDArea/N + MaxDD% is to 100, as MaxDD% is to p%. And p = p% / 100."

This really struck me. I love it. Im going to have to go see how you calculate the DDarea next. I find that very interesting.

Your forumla for PQM seems to help solve the issue you intended from the outset.

This is just such a beautiful explanation and a TRUER representation as the Risk Adjusted Returns are accounted for.

I really can't get over the elegance of this paper!

Thank you so much for sharing!

Joseph

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Last Updated on May 12, 2021


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