To view the report of the last backtest, simply click the Report button in the automatic analysis window. To view results of all past backtests, click the drop-down arrow on the Report button and choose the Report Explorer option. This will display the Report Explorer window that will show the list of all backtests performed. If you double-click on a line, a detailed report will be shown.
The new report is hugely enhanced compared to the old one. It includes separate statistics for all, long and short sides, as well as a large number of new metrics. You can get short help for a given figure by hovering your mouse over a given field name. You will see the description in the tooltip. Short explanations are also provided below:
Exposure % - Market exposure of the trading system calculated on a bar-by-bar basis. The sum of bar exposures divided by the number of bars. Single-bar exposure is the value of open positions divided by portfolio equity.
Net Risk Adjusted Return % - Net Profit % divided by Exposure %
Annual Return % - Compounded Annual Return (CAR)
Risk Adjusted Return % - Annual Return % divided by Exposure %
Avg. Profit/Loss, also known as Expectancy ($) - (Profit of winners + Loss of losers) / (number of trades), represents the expected dollar gain/loss per trade.
Avg. Profit/Loss %, also known as Expectancy (%) - (% Profit of winners + % Loss of losers) / (number of trades), represents the expected percent gain/loss per trade.
Avg. Bars Held - Sum of bars in trades / number of trades.
Max. trade drawdown - The largest peak-to-valley decline experienced in any single trade. The lower, the better.
Max. trade % drawdown - The largest peak-to-valley percentage decline experienced in any single trade. The lower, the better.
Max. system drawdown - The largest peak-to-valley decline experienced in portfolio equity. The lower, the better.
Max. system % drawdown - The largest peak-to-valley percentage
decline experienced in portfolio equity. The lower, the better.
Recovery Factor - Net Profit divided by Max. System
Drawdown.
CAR/MaxDD - Compounded Annual Return divided by
Max. System % Drawdown. Good if greater than 2.
RAR/MaxDD - Risk-Adjusted Return divided by Max. System % Drawdown. Good if greater than 2.
Profit Factor - Profit of winners divided by Loss of losers.
Payoff Ratio - Ratio of average win / average loss.
Standard Error - Standard error measures choppiness of the equity
line. The lower, the better.
Risk-Reward Ratio - Measure of the relation between the risk inherent in a trading system compared to its potential gain. Higher is better. Calculated as the slope of the equity line (expected annual return) divided by its standard error.
Ulcer Index - Square root of the sum of squared drawdowns divided by the number of bars.
Ulcer Performance Index - (Annual Profit - Treasury notes profit) / Ulcer Index. Currently, Treasury notes profit is hard-coded at 5.4. In a future version, there will be a user-setting for this.
Sharpe Ratio of trades - Measure of risk-adjusted return
of investment. Above 1.0 is good; more than 2.0 is very good. More information http://www.stanford.edu/~wfsharpe/art/sr/sr.htm.
Calculation: First, average percentage return and standard deviation of returns
are calculated. Then these two figures are annualized by multiplying them by
the ratio (NumberOfBarsPerYear) / (AvgNumberOfBarsPerTrade). Then the risk-free rate
of return is subtracted (currently hard-coded at 5) from the annualized average return
and then divided by the annualized standard deviation of returns.
K-Ratio - Detects inconsistency in returns. Should be 1.0
or more. The higher the K-Ratio, the more consistent the return you may expect
from the system. Linear regression slope of the equity line multiplied by the square
root of the sum of squared deviations of the bar number, divided by the standard error
of the equity line, multiplied by the square root of the number of bars. More information:
Stocks & Commodities V14:3 (115-118): Measuring System Performance by
Lars N. Kestner
Color-coding in the backtest report (new in 5.60)
Version 5.60 brings an enhanced backtest report: color-coding 'good' and 'bad'
values in the backtest report.
Some of the metrics in the backtest report are color-coded.
Blue means "neutral", Green means "good", Red means "bad".
Metrics that are not colorized are always black.
This color coding is, of course, arbitrary and should be used as guidance only.
Treat 'red' as a warning flag and advice to check the value in detail.
As of now, the following metrics are colorized:
Net Profit, Net Profit % - bad < 0, good > 0
Annual Profit %, bad < 0, neutral between 0 and 10, good > 10
RAR % bad < 0, good > (10 / Exposure)
Avg. Profit/Loss all trades (Expectancy $) - bad < 0, good > 0
Avg. Profit/Loss % all trades (Expectancy %) - bad < 0, good > 0
Max. system % drawdown - bad: dd worse than -30%, neutral: dd between -30 and
-10%, good: -10% to 0%
CAR/MaxDD, RAR/MaxDD - bad < 1, neutral between 1 and 2, good > 2
Recovery Factor - bad < 1, neutral between 1 and 2, good > 2
Payoff Ratio - bad < 1, neutral between 1 and 2, good > 2
See Also:
Backtesting your trading ideas article.
Portfolio Backtesting article.
Backtesting systems for futures contracts
article.
Using AFL editor section of the guide.