DNYL . SPACE

Do you know all the filters / ranking (like profit factor, cagr/dd%, return/dd, ..) to mean profitable or good trend within SQX?

Yes, in StrategyQuant X (SQX), various performance metrics and ranking filters are used to assess whether a strategy is profitable and stable over time. Here’s a list of the most important metrics along with what they indicate and how they can be used for filtering/ranking:

Key Metrics for Evaluating Profitability and Stability

1. Profit Factor
   • What it measures: The ratio of gross profits to gross losses.
   • Good value: A Profit Factor greater than 1.5 is generally considered good, with values over 2 indicating strong performance.
   • Purpose: Filters out strategies that earn significantly more than they lose.
2. CAGR/Max Drawdown % (Compounded Annual Growth Rate / Max Drawdown)
   • What it measures: It compares the strategy’s annualized returns to the maximum drawdown (risk).
   • Good value: A ratio greater than 1 is a positive indicator, meaning the returns are higher than the risk (drawdown).
   • Purpose: Filters strategies that balance returns and risk effectively. Higher values indicate more sustainable growth relative to risk.
3. Return/Drawdown Ratio (Ret/DD)
   • What it measures: Another way to compare the strategy’s return against the drawdown.
   • Good value: The higher, the better. Values above 2 are typically desirable.
   • Purpose: Similar to CAGR/Max DD%, this shows how well the strategy performs against its worst losses.
4. Sharpe Ratio
   • What it measures: The Sharpe Ratio measures risk-adjusted returns, or how much excess return the strategy generates per unit of risk.
   • Good value: A Sharpe Ratio above 1 is considered good, while above 2 is excellent.
   • Purpose: Helps identify strategies that have consistent returns relative to risk.
5. Stability
   • What it measures: Measures the consistency of a strategy’s equity curve (how stable the growth is over time).
   • Good value: A value greater than 0.8 is typically considered good.
   • Purpose: Filters strategies that have steady performance without sharp fluctuations.
6. Open Drawdown %
   • What it measures: The percentage of drawdown that is still open (unrealized loss).
   • Good value: Keeping Open DD% below 15% is often desirable.
   • Purpose: Ensures that strategies don’t leave too much risk open during trades, keeping the drawdowns controlled.
7. Max Drawdown %
   • What it measures: The largest peak-to-valley loss in equity.
   • Good value: Max DD% below 20% is usually acceptable for longer-term strategies, with lower being better for risk-averse traders.
   • Purpose: Filters strategies that limit their risk exposure during downturns.
8. Consecutive Win/Loss Trades
   • What it measures: The maximum number of consecutive winning or losing trades.
   • Good value: This metric is mostly a secondary consideration but can show streaks in winning or losing.
   • Purpose: Can be used to avoid strategies that have long losing streaks.
9. CAGR (Compounded Annual Growth Rate)
   • What it measures: The annualized percentage growth of your account or equity curve.
   • Good value: The higher the better, though it should be balanced with risk measures.
   • Purpose: Shows the growth potential of the strategy.
10. R-Squared (R²)
    • What it measures: Shows the statistical fit of the strategy’s equity curve to a straight line. The closer to 1, the more stable the strategy’s growth.
    • Good value: Above 0.8 is ideal for long-term stability.
    • Purpose: Filters strategies with consistent upward growth.
11. Kelly Criterion
    • What it measures: Calculates the optimal position sizing based on past performance.
    • Good value: A higher Kelly value indicates better risk-adjusted returns, but too high may suggest over-leveraging.
    • Purpose: Guides sizing to maximize growth while managing risk.
12. Net Profit
    • What it measures: The total profit after deducting losses and costs.
    • Good value: Positive and stable net profit over time is crucial, but it should be compared against risk metrics.
    • Purpose: Ensures the strategy is actually making money.
13. Sortino Ratio
    • What it measures: Similar to the Sharpe Ratio but only considers downside risk (negative returns).
    • Good value: A value above 1 is good, and higher values indicate better risk-adjusted performance focusing on negative volatility.
    • Purpose: Helps focus on strategies that minimize downside volatility while delivering good returns.

Filtering Strategies in SQX

• Primary Filters:
  • Sharpe Ratio > 2: Helps find strategies with good risk-adjusted returns.
  • CAGR/Max DD% > 1: Ensures returns are higher than drawdowns.
  • Profit Factor > 1.5: Ensures profits are sufficiently higher than losses.
• Secondary Filters:
  • Open DD% < 15: Ensures drawdowns are within acceptable limits.
  • Stability > 0.8: Ensures a smooth and steady equity curve.
• Other Considerations:
  • Max Drawdown %: This is crucial for risk management, as it can help avoid strategies with sharp drawdowns.
  • Return/Drawdown: Ensures that the strategy’s returns justify the risk it takes.

By using a combination of these filters, especially focusing on Sharpe Ratio, Stability, Profit Factor, and drawdowns, you can filter out strategies that are robust, profitable, and capable of performing well in live trading.

To filter and select the best strategies from your 300+ strategies in Portfolio Master, follow a systematic approach that aligns with your ranking criteria and ensures that only the most robust and stable strategies are included in the final portfolio. Here’s a step-by-step guide to filtering:

1. Apply Your Ranking Criteria

Use the criteria you’ve already set for ranking individual strategies: – CAGR/Max DD% > 1 – Sharpe Ratio > 2 – Profit Factor > 1.5 – Stability > 0.8 – Open DD% < 15%

This initial filter should remove many strategies that don’t meet the baseline performance requirements.

2. Check In-Sample (IS) and Out-of-Sample (OOS) Performance

• IS Testing: Review the performance of each strategy during the in-sample period to ensure that it was optimized correctly.
• OOS Testing: More importantly, assess the performance during out-of-sample testing to ensure the strategy is robust in unseen market conditions. Strategies with a high OOS Sharpe ratio and low OOS drawdowns are more likely to perform well in live trading.

3. Evaluate Strategy Correlation

• Use correlation analysis to ensure that strategies in your portfolio are not highly correlated. Highly correlated strategies expose you to similar risks across multiple strategies, increasing the chances of simultaneous drawdowns.
• Keep strategies with low or negative correlation in your portfolio to achieve diversification and reduce risk.

4. Monte Carlo Simulations

• Perform Monte Carlo stress tests on your selected strategies to assess how they handle market noise and randomness. Strategies that consistently perform well under Monte Carlo simulations are more robust.
• Focus on strategies with a low chance of ruin and those that maintain good metrics like Sharpe ratio and Profit Factor in the simulated results.

5. Examine Trade Frequency and Conditions

• Look for strategies that maintain consistent trade frequency and avoid excessive overtrading, which can increase transaction costs and slippage.
• Ensure that strategies follow a balance of trend-following, breakout, and swing trading methodologies (as you’ve chosen) to reduce dependency on a single market condition.

6. Filter for Drawdown Recovery

• Evaluate how fast each strategy recovers from drawdowns. Strategies that recover quickly are generally more reliable for long-term use. Use the drawdown recovery time as an additional filter.

7. Forward Testing

• Take your top strategies and conduct a small-scale forward testing or paper trading to see how they behave in current market conditions. Live market dynamics often differ from historical data, so this step is crucial for final validation.

8. Select a Balanced Portfolio

• After narrowing down the best-performing strategies, use Portfolio Master to combine them into an optimized portfolio with diverse market exposures and timeframes (H1/H4, M15/H4, etc.).
• Make sure the combined strategies adhere to your risk management rules, such as RRR > 1:3, duplicate orders, closing positions on Fridays, and break-even trailing stops.

9. Monitor Ongoing Performance

• Continue to monitor the performance of your portfolio once it’s live, making adjustments only if necessary. Pay attention to how strategies perform during different market phases (trending, ranging, volatile) to ensure long-term stability.

By following this structured filtering process, you’ll be able to select a portfolio of strategies that not only meet your criteria but are also robust, diversified, and ready for live trading.

Yes, it is possible to find or build a strategy that meets these criteria, but it will depend on several factors, including the quality of your data, the optimization process, and the strategy type.

Here’s a breakdown of what each criterion implies and how achievable it is:

1. CAGR/Max DD% > 1:

• Achievability: This is a reasonable and important target, as it ensures your strategy produces more growth than risk. You can achieve this through proper risk management, consistent profits, and by minimizing drawdowns.
• Tuning Tips: Focus on risk control, such as using tight stop losses and proper position sizing (e.g., your 0.01 lot per $100 account balance rule).

2. Sharpe Ratio > 2:

• Achievability: A Sharpe Ratio above 2 is challenging but realistic, especially with a well-optimized strategy. It implies high risk-adjusted returns with low volatility.
• Tuning Tips: To achieve this, focus on strategies that reduce large fluctuations in returns. Use techniques like trailing stops, break-even exits, and conservative risk management. Avoid strategies with excessive drawdowns or those that rely on highly volatile instruments without proper hedging.

3. Profit Factor > 1.5:

• Achievability: This is a common target for profitable trading strategies. A profit factor above 1.5 indicates that your gross profits are at least 1.5 times larger than your gross losses.
• Tuning Tips: Optimize entry/exit rules, avoid overtrading, and focus on strategies that aim for higher reward-to-risk ratios, such as your target of RRR > 1:3.

4. Stability > 0.8:

• Achievability: Stability near 0.8 is a realistic goal for most well-performing strategies. It shows a relatively smooth and reliable equity curve, which is necessary for long-term performance.
• Tuning Tips: Stability can be enhanced by reducing the frequency of large drawdowns, fine-tuning exit rules, and optimizing over a range of market conditions (using IS and OOS testing).

5. Open DD% < 15%:

• Achievability: This is achievable but can be difficult if you’re targeting high returns. Controlling open drawdown is crucial to keep the account safe from volatile market swings.
• Tuning Tips: You can keep open drawdown in check by adjusting trade size, using dynamic stop-loss management (e.g., ATR-based stops), or employing partial exits as trades move into profit.

Finding Such a Strategy:

1. Backtesting and Optimization: You’ll likely need extensive backtesting with 20 years of M1 data (as you’re already using) to find strategies that meet all these criteria. Sequential optimization across timeframes (H1, H4, etc.) can help refine strategies for long-term stability.
2. Strategy Combination: You may need to combine trend following, breakout, and swing trading methods, as these tend to perform well in various market conditions.
3. Fine-Tuning Parameters: Parameters like risk management rules, trailing stops, and exit timing (closing trades before Friday or after 5 days) will play a key role in managing drawdowns and ensuring the other metrics hold up.

It will take work, but it is possible to find a strategy that fits within these boundaries. Be prepared for iterative testing and refinement in StrategyQuant X to optimize across these performance metrics.

When focusing on long-term stability for your strategy, aside from CAGR/Max DD% and Sharpe Ratio, the most critical metric to consider is Profit Factor. However, other important factors like Stability and Open Drawdown (DD) also play key roles in assessing the reliability of your strategy. Let’s explore these metrics:

1. Profit Factor:

• What it Measures: The ratio of gross profit to gross loss. For example, a profit factor of 1.5 means that for every dollar lost, you are making 1.5 dollars in profit.
• Importance: A higher profit factor (typically > 1.5) is crucial for long-term viability. It shows that the strategy generates more profit than loss over time.
• Why It’s Key for Long-Term Stability: It directly reflects the strategy’s overall profitability, indicating whether it can sustain profitability through different market conditions.
• Ideal Target: Profit Factor above 1.5 is solid, while a value of 2.0 or more is very strong.

2. Stability of Returns (Stability):

• What it Measures: The consistency of your strategy’s performance over time. It looks at the smoothness of the equity curve.
• Importance: Stability indicates how reliable the strategy is at generating returns without significant fluctuations.
• Why It’s Key for Long-Term Stability: A stable equity curve suggests that your strategy can withstand various market environments without experiencing wild swings in performance.
• Ideal Target: Aim for a stability score close to 1, where 1 represents a perfectly straight equity curve.

3. Open Drawdown (Open DD%):

• What it Measures: The maximum unrealized loss during a trade (before it’s closed).
• Importance: While Max Drawdown focuses on the worst drawdown for closed trades, Open DD% shows how much risk your strategy takes while trades are still open.
• Why It’s Key for Long-Term Stability: High open drawdowns can cause emotional stress and can put your account at risk, especially during volatile periods. Keeping open drawdowns low ensures your strategy can withstand market swings without large floating losses.
• Ideal Target: Aiming for Open DD% < 10-15% is generally considered good for long-term sustainability.

Summary of Metrics (Besides CAGR/Max DD% and Sharpe Ratio):

1. Profit Factor (Most Important): Reflects the overall profitability of your strategy. Target >1.5, ideally >2.
2. Stability: Measures how smooth and reliable your equity curve is. Aim for a stability score near 1.
3. Open Drawdown %: Keep this value as low as possible to avoid large floating losses. Aim for <10-15%.

Focusing on these three metrics will help confirm your strategy’s long-term stability and profitability, making it robust enough to withstand different market conditions.

what’s the most priority betwee CAGR/Max DD% and Sharp ratio ?

When prioritizing between CAGR/Max DD% and Sharpe Ratio, it depends on your strategy’s goals and risk tolerance. Here’s how to assess their importance:

1. CAGR/Max DD% (Compound Annual Growth Rate / Maximum Drawdown Percentage):

• What it Measures: The growth of your account over time (CAGR) relative to the worst peak-to-trough decline (Max Drawdown).
• Importance: It tells you how much risk (drawdown) you’re taking to achieve returns. A higher CAGR/Max DD means your returns are efficient in relation to the risk you’ve taken.
• When it’s Critical:
  • When you aim for long-term, steady growth with controlled risk.
  • If you prioritize minimizing drawdowns, which is crucial for strategies that need to stay resilient in volatile markets (like your long-term trading approach).

2. Sharpe Ratio:

• What it Measures: The return per unit of risk (volatility). It measures how well your strategy compensates you for the risk taken (volatility of returns).
• Importance: A higher Sharpe ratio (above 1, or ideally above 2) means the strategy offers a better risk-adjusted return. It’s a good metric for comparing different strategies to see which one generates smoother returns relative to volatility.
• When it’s Critical:
  • When you care about consistent performance and want to compare risk-adjusted returns between strategies.
  • If your strategy experiences large fluctuations in returns, the Sharpe ratio helps determine if the higher returns are worth the risk (volatility).

Comparison in Your Strategy:

• CAGR/Max DD%: Since you are building a strategy for long-term use, minimizing drawdowns (while still growing your account) is a key consideration. This metric is more focused on the capital preservation aspect and will be vital in avoiding large losses that could wipe out significant portions of your account.
• Sharpe Ratio: It’s essential for ensuring that your strategy has consistent returns relative to risk. However, if your drawdowns are well-managed (as per the focus on risk control), the Sharpe Ratio becomes secondary in importance.

Which is More Important?

For your strategy goals (focused on long-term performance and risk management): 1. CAGR/Max DD% should be the top priority because it balances growth with minimizing drawdowns. 2. Sharpe Ratio is important but secondary to CAGR/Max DD%. You should still aim for a Sharpe ratio above 1 (preferably 2+), but don’t compromise your drawdown management to chase a higher Sharpe ratio.

Conclusion:

Focus on maximizing CAGR/Max DD% to ensure your strategy can grow steadily with minimal drawdowns. A high Sharpe Ratio (above 2) is an excellent goal but secondary to ensuring that your strategy survives long-term market swings with controlled drawdowns.

i just building and got some prototype but i asking u: Profit factor, Ret/DD ratio, Stability, Fitness, Open DD%, Win/Loss ratio and CAGR/Max DD%. Rank these values ​​from most important to least important that I should consider, including the analysis of both IS and OOS at each stage.

When evaluating a trading strategy, especially in StrategyQuant X (SQX), the metrics you mentioned are all important but serve different purposes. Ranking them depends on your specific goals (e.g., minimizing risk, maximizing returns, or focusing on long-term sustainability). Here’s a ranking from most important to least important, considering both In-Sample (IS) and Out-of-Sample (OOS) stages:

1. CAGR/Max DD% (Compound Annual Growth Rate / Maximum Drawdown Ratio)

• Why It’s Important: This is a key metric for long-term growth and sustainability of the strategy. It balances how much the strategy grows versus how much it risks. A high CAGR with a low Max Drawdown ensures that the strategy is generating returns without taking excessive risk.
• IS/OOS Consideration: A good ratio in both IS and OOS suggests that the strategy is scalable and robust across different market environments.
  • IS: Focus on optimizing this metric to ensure strong growth.
  • OOS: Ensure consistency; a large drop in OOS could indicate overfitting.

2. Profit Factor

• Why It’s Important: Profit Factor (gross profit divided by gross loss) is essential for understanding the overall profitability of the strategy. A Profit Factor greater than 1 indicates a profitable system, with values above 1.5 or 2 being ideal.
• IS/OOS Consideration: Profit Factor must remain solid in OOS testing. If it drops significantly OOS, the strategy may be curve-fitted.
  • IS: Aim for a strong value, but don’t prioritize it at the expense of risk management.
  • OOS: Focus on stability and a consistent profit factor.

3. Ret/DD Ratio (Return-to-Drawdown Ratio)

• Why It’s Important: This metric balances returns against drawdowns. A high Ret/DD ratio indicates that the strategy generates good returns relative to the risk (drawdown) it takes.
• IS/OOS Consideration: It’s important in both IS and OOS stages because it ensures that your strategy’s performance isn’t reliant on taking high risks. Look for consistency across both.
  • IS: Focus on maximizing returns while keeping drawdowns minimal.
  • OOS: The ratio should not degrade significantly, ensuring stability.

4. Open Drawdown % (Open DD%)

• Why It’s Important: Open DD% tracks the maximum floating loss during a trade that hasn’t closed yet. This is crucial for understanding the worst-case scenarios and how your strategy behaves in adverse conditions. High Open DD% could signal that the strategy lets trades run into significant losses before closing them.
• IS/OOS Consideration: In OOS, you want to see a manageable Open DD%. A high Open DD% in OOS could indicate riskier trades.
  • IS: Optimize to keep Open DD% within acceptable risk limits.
  • OOS: Check if the Open DD% stays controlled in unseen data.

5. Stability

• Why It’s Important: Stability measures how consistent the equity curve is over time. A stable equity curve is essential for long-term profitability and avoiding emotional stress from sharp equity fluctuations.
• IS/OOS Consideration: Stability should be maintained across both IS and OOS phases to ensure that the strategy isn’t over-optimized to one specific market condition.
  • IS: High stability is desirable, but watch out for overfitting.
  • OOS: Check if stability remains intact without large drops in equity.

6. Win/Loss Ratio

• Why It’s Important: While the Win/Loss ratio is helpful, it doesn’t paint a full picture. A strategy with a lower win rate can still be profitable if the winning trades are larger than the losing ones. It’s more useful when combined with other metrics like Profit Factor or Return-to-Drawdown.
• IS/OOS Consideration: While optimizing, focus less on having a high Win/Loss ratio and more on profitability. The Win/Loss ratio may vary but shouldn’t drastically change between IS and OOS phases.
  • IS: It’s fine if the Win/Loss ratio isn’t extremely high as long as the strategy is profitable.
  • OOS: Ensure the ratio doesn’t drop significantly.

7. Fitness

• Why It’s Important: Fitness is an overall measure used by SQX to rank strategies based on multiple performance metrics. It’s a good indicator in the early stages of strategy generation but can be less reliable than specific metrics like CAGR/Max DD% or Profit Factor for deep analysis.
• IS/OOS Consideration: While a high fitness score is useful for identifying strong candidates in genetic evolution, don’t rely on it too heavily in OOS testing. Focus more on the other key metrics.
  • IS: A high fitness score helps in the strategy-building process.
  • OOS: Use other metrics to verify performance rather than fitness alone.

Stage-Specific Considerations:

In-Sample (IS) Analysis:

• In the IS phase, you are primarily focusing on optimizing your strategy.
  • Prioritize CAGR/Max DD%, Profit Factor, and Ret/DD Ratio. These three metrics ensure that you have a strategy that is growing profitably with manageable risk.
  • Pay attention to Stability and Open DD% next, as they will indicate how smooth your strategy’s equity curve is and whether you can tolerate the drawdowns during open trades.
  • Win/Loss Ratio is less critical here, as it can be misleading if isolated from other factors. A lower Win/Loss ratio can be fine as long as the profits outweigh losses.
  • Fitness is helpful early on but don’t let it overshadow more significant performance metrics.

Out-of-Sample (OOS) Analysis:

• In the OOS phase, your focus shifts to robustness and ensuring the strategy is not overfitted to past data.
  • Look for consistency in CAGR/Max DD%, Profit Factor, and Ret/DD Ratio between IS and OOS. If these metrics significantly degrade, it’s a sign of overfitting.
  • Stability becomes more crucial here. A strategy that maintains stability in OOS is likely to perform well in live markets.
  • Open DD% should be well-managed, and ideally, it should not increase dramatically in OOS testing.
  • The Win/Loss Ratio can fluctuate, but it should not collapse in OOS. Ensure that profitable trades remain larger than losing ones.

Final Ranking Summary:

1. CAGR/Max DD% (Balances growth vs. risk, essential for long-term viability)
2. Profit Factor (Key profitability measure)
3. Ret/DD Ratio (Measures return relative to risk)
4. Open DD% (Manages risk on open trades)
5. Stability (Ensures a smooth equity curve)
6. Win/Loss Ratio (Helpful but secondary to profitability metrics)
7. Fitness (Useful early but less important for final validation)

This ranking should help guide your focus when optimizing and validating strategies in SQX. Let me know if you want to dive deeper into any specific aspect of the metrics!