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Showing on CAGR and MDD in backtest results #5106

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quantfor opened this issue Jun 8, 2021 · 3 comments
Open

Showing on CAGR and MDD in backtest results #5106

quantfor opened this issue Jun 8, 2021 · 3 comments
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Backtest Enhancement Good first issue

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@quantfor
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@quantfor quantfor commented Jun 8, 2021 •
edited

This is a very simple enchantment, but I think it is so helpful for intuitively comparing strat's performances.

Example

Such as this image, showing CAGR and MDD is extremely intuitive for comparing strategies, higher CAGR(profitability) and lower MDD(risk) is better!

It's about showing CAGR (geometric mean of yearly profits, (current total stake)/(starting wallet)^(1/years passed), (simply,) years_passed = days_passed/365) and MDD (((strat's)max - min / max) * 100%, currently freqtrade has the drawdown, but it is unintuitive because it gives ratio based on starting wallet stakes).

This will make freqtrade's backtests look more intuitive and easier to compare strats.
How do you guys think about this very little enchantments?
@quantfor
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@quantfor quantfor commented Jun 8, 2021 •
edited

Consideration: (this is not essential)
Maybe adding the sharp ratio for backtest can be also good. And we have codes in the hyperopt so all we need to do is just using that code. But can there be a little performance changes for backtesting? If so, just adding option params(such as --sharp true) to show sharp ratio might be good.
@xmatthias
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@xmatthias xmatthias commented Jun 9, 2021

we do have an issue for sharp already (#1907 ) - but so far, it was not important enough for anyone to actually spend time to implement it.

We have a section for strategy metrics - i'll surely not mind having others added there as well if they make sense.
I'm however not sure what MDD will be based on - you say "max - min / max" ... but max / min of what? absolute wallet? relative profits ... you can do min/max calculations on many things - so it's kinda unclear to me for now how this calculation should look like.
@quantfor
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@quantfor quantfor commented Jun 9, 2021 •
edited

That means absolute wallet including current open positions(maximum total stake - minimum total stake / maximum total stake)

I think it has already there named max drawdown high and low. That will do exact thing.
The problem of current drawdown ratio is it is calculated through (high-low / starting stake) but it is not intuitive because profit compounds, so if drawdown happened later on, it gives bigger ratio, so it highly depends on when max drawdowns happened. So adding one more metrics that does not influenced by compounding. (And I found this exact thing extremely useful in other systemic trading tools, they are using it too.)

1
This means (-)21% MDD

(And for sharp ratio - I agree it's not a necessary thing. So can bother with it later.)
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@xmatthias @quantfor