There are different reasons to view system results: you can visually inspect the "equity" line, you can analyze
the system report generated after the system testing.
Visual Inspection
Launching the system
for specific data, the program will automatically analyze every data bar on your graph, searching for matching criteria
you have defined in the system and showing you in a graphic form all purchases and sales you would make if you performed
the transaction pursuant to the tested concept.
By scrolling the graph up and down you can notice immediately e.g. that the
system failed to recognize major price changes or made too many unnecessary transactions in the lateral trend.
This inspection gives you the first idea of how the system operates and whether it is built correctly.
Using the System Report
As a supplement to visual
inspection, the System Report will provede you with details concerning the results of the tested strategy, including: how much money you
could make if you performed transactions based on the tested system (on both sides of the market).
The System Report shows profits (or losses) which would be generated by the system as well as other factors, such as: decreases
in equity, return on the account, transaction resulting in the highest profit (loss) and other.
The System Report helps you decide whether you can actually use the tested system. For instance, whether the potential
profit of your system is sufficient to use the system in real life? Whether the system's behaviour matches your personality as a speculator?
Or maybe the system generates too many (or not enough) transactions? Is the percentage return attractive for you? Or maybe long series
of transactions resulting in losses are unacceptable to you? Can you use a system involving large decreases in equity even if the final profits are
high? Or maybe you would prefer a system offering low profits but without large decreases in equity? These are questions only you can
answer.
If you like the system as built but have doubts about some of the results shown in the report, you can go back to the module in which you create
the system to add or remove some elements of the system or change certain criteria. After further analysis, you can decide which signals
are good and whether the idea of the system is good in general. You can also go back to the system in construction and change
selected criteria.
Remember, if you like have found a system which yields no profit on the money you have exposed, you have lost nothing.
You have tried a system using real-life data in real-life market conditions without risking a penny. The most efficient systems are discovered while
analyzing results of the systems generating losses. Thereforem if your system yields disappointing results, you should find out why the
system "is ineffective". You may take some of your best ideas from error analysis.
Using the"Equity" line
Equity line is yet another important analytic tool. It is important because on look at the line tells us whether the system provides
consistent, reliable information on the market for which it has been created. The equity line offers you an overview of profits
and losses generated by the system during the trial period.
For example, the equity line shows you how consistently your system was generating profits during the trial period. If during
testing it had turned out that the system made a $100,000 profit in 10 years, but $70,000 of it was made during the last 12 months the line
would tell you that the system generated "poor" results over the remaining 9 years.
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