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Percent Profit Factor

Posted: Tue Apr 28, 2015 8:54 am
by shepherp
Hi. What are the inherent flaws in using Percent Profit Factor to filter markets selection when creating my portfolio? I understand using past data no guide to future profit contribution etc but given that's the premise for testing all parameters using optimization anyway, Percent Profit Factor seems a very good starting point for selecting which markets to include in a large diversified futures portfolio. Thanks.

Re: Percent Profit Factor

Posted: Tue Apr 28, 2015 9:20 am
by Tim Arnold
I understand using past data no guide to future profit contribution
Exactly. Test a basket of 50 markets from 1990-2000 and pick the top 10 based on some criteria like Percent Profit Factor. Then test these 10 markets from 2001-2010. Compare this to having traded all 50 from 2001-2010 or a random selection from 2001-2010.

Re: Percent Profit Factor

Posted: Wed May 27, 2015 5:25 am
by sinkpretend
Its always considered as one of the best practices to analyze data before decision as Arnold indicated the range and steps. Here is a link which will help you to analyze data and understand more.

Re: Percent Profit Factor

Posted: Wed May 27, 2015 5:36 am
by shepherp
Tim, Sinkpretend, thank you v much for the input; its helpful to feel more on the right path.

Re: Percent Profit Factor

Posted: Wed May 27, 2015 4:36 pm
by AFJ Garner
For what it is worth my belief is that cherry picking a portfolio is one of the best areas of self deception in the whole business. Random portfolio testing is one of the best ways to test a strategy. Easier with mutual funds or stocks, somewhat more restricting with futures where the available range is much smaller.

"Optimisation" seems to me to be a very dangerous concept but of course some weeding out has to be done in some areas such as the parameters of a system. No easy or lasting answer.