Profit factor (IS) > 1.4 Ret/DD ratio (full) > 4 Stability (is) > 0.6 open dd % (is) < 50% cagr/max dd % (is) > 0.6 sharp ratio (is) > 1.5 max dd % (OOs) < 70%

Maximize in possible value of all those

To maximize the potential of your strategies using these filters, you should aim for the highest achievable values within these constraints to ensure robust and well-performing strategies. Here’s a refined approach to push for optimal values in each metric:

Optimizing the Filters for Portfolio Selection:

  1. Profit Factor (IS) > 1.4:
    • Goal: Aim for a profit factor of at least 1.5 or higher. The higher the profit factor, the more profitable the strategy is relative to its losses. Strive for strategies that exceed 1.5 and ideally reach 2.0 or above for optimal performance.
  2. Ret/DD Ratio (Full) > 4:
    • Goal: Maximize this ratio as much as possible. The higher the Ret/DD ratio, the better the strategy’s return relative to its drawdown. Look for strategies with values significantly above 4, aiming for 5-6 or higher if possible.
  3. Stability (IS) > 0.6:
    • Goal: Seek strategies with stability above 0.8. Higher stability indicates a smoother equity curve and less variability in performance.
  4. Open DD % (IS) < 50%:
    • Goal: While < 50% is acceptable, aim for open drawdown values below 30% to maintain better risk control. The lower, the better, as it indicates less capital is exposed during active trades.
  5. CAGR/Max DD % (IS) > 0.6:
    • Goal: Aim for this ratio to be above 1.0. This ensures that the strategy’s annualized return is greater than its maximum drawdown, indicating good performance relative to risk.
  6. Sharpe Ratio (IS) > 1.5:
    • Goal: Look for strategies with a Sharpe ratio above 2.0, as this indicates strong risk-adjusted returns. A Sharpe ratio above 2.0 suggests consistent and significant returns compared to the strategy’s risk.
  7. Max DD % (OOS) < 70%:
    • Goal: Ideally, target strategies with OOS max drawdown below 40-50% for more secure, sustainable performance. This ensures the strategy remains resilient even under unseen market conditions.

Tips to Maximize Each Metric:

  • Optimization and Fine-Tuning: Conduct sequential optimizations and Monte Carlo simulations to find parameter combinations that yield the highest metrics within your constraints.
  • Select Strategies with High-Ranking Metrics: Rank your strategies by each filter’s value and prioritize those that excel in multiple categories.
  • Diversify by Strategy Type: Include various strategy types that perform well across different market conditions to enhance overall portfolio performance.

Suggested Ranking and Prioritization:

  1. Ret/DD Ratio – As a primary filter, focus on maximizing this to ensure high returns relative to drawdowns.
  2. Profit Factor and Sharpe Ratio – These metrics ensure profitability and risk-adjusted performance.
  3. Stability and Drawdown Metrics – Balance stability and drawdown values to select strategies that are consistent and safe.
  4. CAGR/Max DD % – This ratio should be used as a secondary filter to confirm that the selected strategies provide a good return for the risk taken.

By aiming for values significantly higher than your minimum thresholds, you can create a portfolio that is both high-performing and robust, capable of adapting to different market conditions while maintaining acceptable risk levels.

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