backtest results, sharp ratio

[sosMsos]

I have my first simple, winning strategy in place and wonder why the sharp ratio is so low, since the rst looks quite ok though. I expected a sharp ratio of >1

Any explanation?

+ I wonder, when i use "set order quantity by account size" does net profits show me the compounded net winnings, +reinvested profits?. I wonder since CAGR is not yet implemented.

If not, how can i estimate CAGR for the results?

[NinjaTrader_Brett]

Hello,

Thanks for the post.

1) Please see this page for how the ratio is calculated and its formula. Understanding Sharpe ratio.
http://www.ninjatrader.com/support/helpGuides/nt7/statistics_definitions.htm?zoom_highlightsub=sharp e

Taking into effect that you need more then one month of trade data here to compute this statistic please insure you have more then this. If you do I suspect this is the true value for Sharpe.

2) Yes this is what this allows:
Set order quantity
Sets how the order size is determined, options are:
"by default quantity" - User defined order size
"by strategy" - Takes the order size specified programmatically within the strategy
"by account" - Allows you to set a virtual account value that is used to determine maximum order size based on margin settings per instrument set in the Instrument Manager


http://www.ninjatrader.com/support/helpGuides/nt7/backtest_a_strategy.htm

Let me know if I can be of further assistance.

[sosMsos]

regarding sharpe: do you have any explanation for why its so low? What could be the causes in relation to the other statistics?

@ 2) so NT adds losses and profits from previous trades to estimate actual account size available for ordersize?

[NinjaTrader_Brett]

Hello,

(Profit per Month – risk free Rate of Return) / standard deviation of monthly profits

The above is the forumala. To explain a low Sharpe Ratio we need to find the input data that caused it, this unfortunately means checking it by hand to verify its calculation.

Most likely the trades that were taken where winning trades where very risky trades. Would be where I would start looking first.

2) Correct.

[sosMsos]

Thanks Brett, one thing to add:
NT does not factor in commission though i have added it to the instrument under my broker, and chose it in the bcktesting tab:

under SPY/ misc/ interactive brokers/one commission level defined ($0,005/ unit, minimum $2)

anything i did wrong here or why its not accepted when backtesting?

[NinjaTrader_Brett]

Hello,

Backtesting uses a different setting. You have it set for live trades and backtesting uses its own commission setting.

This needs to be set in the same place but instead under the simulator connection.

Let me know if I can be of further assistance.