Signal Analysis Page: Equity Risk
The Modify Field Dialog allows you to analyze and modify the properties of a field. The Signal Analysis page allows you to analyze statistics associated with an entry/exit signal.
& For help with entry/exit signals, see Creating and Analyzing Entry/Exit Signals.
Equity Risk Sub-Page
This sub-page displays several measures that can be useful for determining the risk associated with the fluctuations in the equity while trading a particular entry/exit signal. Some of the information can be analyzed as either percentage gains or dollar gains.
Ä Note: This sub-page does not take into account the strength of the prediction for predicted signals. That information can be assessed on the Training Analysis page.
What Can I Determine From This Page?
The following types of risk can be assessed using these strategies. For help with the individual values, see below for the descriptions of each section.
· Day-to-Day Volatility
Look at the Sharpe Ratio. This value takes into account the profitability versus the underlying volatility.
You should also look at the Beta value. This will give you an idea of how volatile the equity is versus a buy/hold strategy for this data series or the benchmark data series.
· Worst Case Scenarios
Look at the Maximum Draw Down values. This will give you an idea of the size of the individual losses that occurred in the process of achieving these gains. This can be important for determining the size of margins required when trading on margin accounts.
This section displays an analysis of the equity on a bar-by-bar basis. The values that are used in these calculations are available on the Equity By Bar sub-page.
p Average Change Per Bar
This value is the average change in equity for each bar, including when the simulated trading was not in the market. This can also be considered to be the average gain or loss than was taken each day.
p Standard Deviation
This value is the standard deviation of the equity for each bar, including when the simulated trading was not in the market. For a typical bar, the change in equity will tend to be within one standard deviation of the average change. This can be useful for determining the volatility of the daily equity from this signal. Higher standard deviations indicate more bar-by-bar volatility.
p Upside Deviation
This value is the standard deviation of the equity for each bar where the equity increases. Higher values indicate more volatility in the amount by which the equity increases.
p Downside Deviation
This value is the standard deviation of the equity for each bar where the equity decreases. Higher values indicate more volatility in the amount by which the equity increases.
Ä Note: Since this section analyzes the equity curve on a bar-by-bar basis, it is not available specifically for long or short trades. If you would like to analyze the effects of only trading long or only trading short, you can do so by changing the signal analysis options to include that specific type of trading.
This section displays an analysis of the changes in the equity curve compared to changes in the buy/hold equity curve and the benchmark equity curve. Specifically, the Beta is defined as the slope of a linear regression between these two values. An optional benchmark data series can also be used for calculating the beta.
Ä Note: The benchmark data series is specified in the trading style being used for analysis.
Beta values greater than one indicate that the equity curve changed on a bar-by-bar basis by a larger amount than the benchmark. Values less than one indicate that it changed less than the benchmark. Values less than zero indicate that it typically moved in the opposite direction from the benchmark.
Beta values are relative. A value of two indicates that the change in the equity curve will typically be twice as large as the change in the benchmark.
p Beta
This value is the Beta for all of the bars in the date range.
p Beta on Increase
This value is the Beta for all of the bars for which the benchmark increased. This is useful for determining how the equity curve reacts on days when the benchmark increases.
p Beta on Decrease
This value is the Beta for all of the bars for which the benchmark decreased. This is useful for determining how the equity curve reacts on days when the benchmark decreases.
Ä Note: Since this section analyzes the equity curve on a bar-by-bar basis, it is not available specifically for long or short trades. If you would like to analyze the effects of only trading long or only trading short, you can do so by changing the signal analysis options to include that specific type of trading.
Equity Risk Measures
This section displays an analysis of the equity on a bar-by-bar basis. The values that are used in these calculations are available on the Equity By Bar sub-page.
p Sharpe Ratio By Bar
This value is the average change in the equity over the standard deviation of those changes. This is useful as a basic reward-to-risk ratio. Higher Sharpe Ratios indicate that a greater amount of average profit could be made with less day-to-day volatility.
p Annualized Sharpe Ratio
This value annualizes the Sharpe Ratio By Bar based on the approximate number of bars in the trading year. This normalizes the Sharpe Ratio value for comparison between different periodicities and other software.
Ä Note: Traditional Sharpe Ratio values also take into account a Risk-free Rate of Return. This value is not taken into account in TradingSolutions.
Ä Note: The Annualized Sharpe ratio is essentially a measure of profit and volatility for the year based on the data being analyzed. It is not the same as looking at the by-bar value over the course of a year.
p Sortino Ratio
This value is the average change in the equity over the downside deviation of those changes. It is similar to the Sharpe Ratio, but instead of penalizing for general volatility including upward changes, it only penalizes for downward volatility.
p Annualized Calmar Ratio
This value is the annual percent gain over the maximum drawdown from high equity. It is similar to the Sharpe Ratio, but penalizes based on the worst case scenario, rather than on volatility.
Ä Note: Since this section analyzes the equity curve on a bar-by-bar basis, it is not available specifically for long or short trades. If you would like to analyze the effects of only trading long or only trading short, you can do so by changing the signal analysis options to include that specific type of trading.
This section reports the low equity versus various points in the equity curve. This is useful for determining how prone the signal was to losses. It also is useful for determining the margin requirements for accounts that trade on margin.
It is important to note that these values typically occur in the middle of the trade, not necessarily on the exit.
p from Investment
This value indicates the lowest amount of equity relative to the initial investment for the entire date range. This is the largest loss relative to initial investment. It will typically include the losses from several trades.
p from High Equity
This value indicates the lowest amount of equity relative the previous high in the equity curve. This is the largest loss relative to the best gain. It will typically include the losses from several trades.
Ä Note: The percentage version of this value is typically the most useful for establishing margin requirements since it displays the largest percentage loss within the equity curve.
How Did I Get Here?
This is a sub-page of the Modify Field Dialog: Signal Analysis page.