Pair Trading Lab Helpdesk & Forum

Pair Trading Lab => Suggestions And Feature Requests => Topic started by: Kevin McGrath on August 09, 2013, 09:24:53 am

Title: CAGR and ROI based on fixed trade size
Post by: Kevin McGrath on August 09, 2013, 09:24:53 am

Just a thought - I often find that compounded backtest results are misleading versus backtest results using a fixed trade size, as they tend to inflate the actual gains toward the end.  I personally would not be swinging all of my profits back into each trade every time, so a fixed trade size model might be helpful as well.

Title: Re: CAGR and ROI based on fixed trade size
Post by: admin on August 11, 2013, 11:49:36 am

Hello Kevin,

unfortunately using fixed trade size brings another problems:

• CAGR, ROI, MaxDD % (most of percentage-based metrics) make not much sense anymore
• what to do with fixed trade size if your account equity drops below the initial balance?

We think that using compounded model (reinvest profits) is more reliable and more fits the real situation how users will trade pairs in real life. In our opinion, trading pairs without reinvesting profits don't really make sense anyway, considering best pair traders make 30% p.a. when compounded.

Title: Re: CAGR and ROI based on fixed trade size
Post by: Trevor Carvey on February 15, 2015, 09:10:16 am

so is it possible to run an backtest using a fixed trade size please?  does the backtest model enable us to do this?

thanks

Title: Re: CAGR and ROI based on fixed trade size
Post by: admin on February 15, 2015, 01:33:14 pm

We were thinking about that at the very beginning and decided to not to support it. We don't see much sense in doing that. If you are interested, I can explain this in more details.