MAR Ratio, etc.

Discussions about the testing and simulation of mechanical trading systems using historical data and other methods. Trading Blox Customers should post Trading Blox specific questions in the Customer Support forum.
Post Reply
Salamander
Senior Member
Senior Member
Posts: 37
Joined: Sun Feb 06, 2005 4:31 pm
Location: Massachusetts/New York City

MAR Ratio, etc.

Post by Salamander »

Hi, people. I have recently discovered the whole philosophy of trend following and am very excited about making a monumental shift in my trading from long-biased, fundamentally driven to methodical and systematic.

Anyway, I have a dumb question due to my novice level: what is the MAR ratio?

Also, I have researched many systems by linking through websites, and many seem too good to be legit. For example, there's one called TrendSimplicity that backtested 25 markets to 1984 and returned >100% per year. Sounds fishy.

Do you guys build and trade your own systems only or do you sometimes add in an outside system to "diversify"?

Finally, any suggestions on systems? Should I go with the original Turtle System?

Many thanks. 8)
Roscoe
Roundtable Knight
Roundtable Knight
Posts: 250
Joined: Sat Jan 24, 2004 2:06 am
Location: Houston TX

Re: MAR Ratio, etc.

Post by Roscoe »

Zoomy wrote:Anyway, I have a dumb question due to my novice level: what is the MAR ratio?
MAR = CAGR / MDD%
Zoomy wrote:Also, I have researched many systems by linking through websites, and many seem too good to be legit. For example, there's one called TrendSimplicity that backtested 25 markets to 1984 and returned >100% per year. Sounds fishy.
If it sounds too good to be true then it probably is...
Zoomy wrote:Do you guys build and trade your own systems only or do you sometimes add in an outside system to "diversify"?
Own systems - it's hard to have faith in someone else's idea.
Zoomy wrote:Finally, any suggestions on systems? Should I go with the original Turtle System?
Test everything and make an informed decision based on your own testing.
Salamander
Senior Member
Senior Member
Posts: 37
Joined: Sun Feb 06, 2005 4:31 pm
Location: Massachusetts/New York City

MAR Ratio, etc.

Post by Salamander »

Thanks Roscoe. :shock:
verec
Roundtable Knight
Roundtable Knight
Posts: 162
Joined: Mon Jun 09, 2003 7:04 pm
Location: London, UK
Contact:

Post by verec »

Well ... I "Googled TrendSimplicity, listened patiently to all 7 of the video demos (where the guy utters the word "simply" three times a minute, and teaches you how to open and close windows ...)

This system might be good. The question is, would I trade it? And the answer is a resounding: No!

Because he doesn't disclose what any of the three systems are, nor how YOU can do the back testing he is demo-ing. The problem is not that 100% return a year sounds fishy, but that I wouldn't have the confidence required to trade a closed-box system.

Would you?
JimR
Full Member
Full Member
Posts: 21
Joined: Sun Feb 27, 2005 5:03 pm
Location: New Jersey

Post by JimR »

This question is REALLY dumb.... :oops:

I know what the MAR ratio is & what is represents for the most part....I just dont know what "MAR" stands for! Looked all over this board & on the internet & couldn't find it. Everyone just uses "MAR". :shock:

Im assuming it is: "M_____ at Risk". :lol:

If anyone could be so kind as to fill in the blank, I would be ever so grateful.


Thanks!
Angelo
Roundtable Fellow
Roundtable Fellow
Posts: 90
Joined: Fri Apr 29, 2005 4:31 am
Location: Italy

Post by Angelo »

JimR wrote:
I just dont know what "MAR" stands for!
MAR stands for "managed account report", that is one of the oldest magazines (www.marhedge.com) about hedge funds and CTA's.

A lot of years ago, they started to use this ratio when reviewing performance of money managers in their magazine, so it became common refer to it as the "MAR" ratio, even if they certainly weren't the first professionals to compare different trading results with this ratio.
JimR
Full Member
Full Member
Posts: 21
Joined: Sun Feb 27, 2005 5:03 pm
Location: New Jersey

Post by JimR »

hmmm....

I had also just come across something on the web calling it "minimal acceptable return" (MAR).

http://www.sortino.com

Maybe we can get a consensus from some others?

Thanks for your reply.
Last edited by JimR on Fri Apr 14, 2006 12:38 pm, edited 1 time in total.
Angelo
Roundtable Fellow
Roundtable Fellow
Posts: 90
Joined: Fri Apr 29, 2005 4:31 am
Location: Italy

Post by Angelo »

JimR wrote:hmmm....

I had also just come across something on the web calling it "minimal acceptable return" (MAR).

http://www.sortino.com/htm/Upside%20Potential.htm.

Maybe we can get a consensus from some others?

Thanks for your reply.

Jim,

I feel you don't really trust the answer. That's your choice and is not a problem for me. Just be advised that I'm not able to open your link anyway.

Greetings,

Angelo.
Forum Mgmnt
Roundtable Knight
Roundtable Knight
Posts: 1842
Joined: Tue Apr 15, 2003 11:02 am
Contact:

Post by Forum Mgmnt »

They are both valid acronyms.

Since M, A, and R are all common letters; it does not surprise me that we have two acronyms using the same letters; acronyms being what they are, just shorthand representations. So we have to pull their meaning from context.

If you see the word "ratio" after MAR, MAR refers to the Managed Account Reports ratio defined by CAGR% / Maximum Drawdown.

I've generally see the other MAR, where MAR represents Minimum Acceptable Return as a placeholder for use in a formula where writing everything out would make the formula unwieldy.

Generally, here on this board, and most place where you see trading system comparisons or discussions, MAR will refer to Mar Ratio which in turn refers to the measure popularized by Managed Account Reports as Angelo earlier stated.

- Forum Mgmnt
JimR
Full Member
Full Member
Posts: 21
Joined: Sun Feb 27, 2005 5:03 pm
Location: New Jersey

Post by JimR »

Well enough...thanks c.f. for clarifying that.

Didn't mean to doubt your answer Angelo, I was just getting different answers from my own inquiries. You were correct.

Based on the "Managed Account Reports ratio defined by CAGR% / Maximum Drawdown" definition, exactly how is this ratio used in rating portfolio performance and how should we apply this ratio as a barometer to our own trading results?


Best Regards,
tobbe
Senior Member
Senior Member
Posts: 41
Joined: Sat Feb 21, 2004 4:25 pm

Post by tobbe »

JimR wrote:Based on the "Managed Account Reports ratio defined by CAGR% / Maximum Drawdown" definition, exactly how is this ratio used in rating portfolio performance and how should we apply this ratio as a barometer to our own trading results?
I don't think there's an answer that we could all agree upon :wink:. But just trying to find answers to such questions is very rewarding... and most important.

Try these threads. The first one is just great and its content well worth meditating over.

By What Measure? - How do You Know if a System is Good?
Computing the MAR Ratio - Using what sort of drawdown?
Risk Adjusted Returns

cheers,
tobbe
JimR
Full Member
Full Member
Posts: 21
Joined: Sun Feb 27, 2005 5:03 pm
Location: New Jersey

Post by JimR »

Thanks for the links Tobbe.

I would surmise that, if we just follow our rules, mainly cutting our losers & letting our winners run, these various performance-grading ratios will take care of themselves. After all, favorable ratios are the result of following a good set of trading rules, correct? :lol:

I sometimes wonder if we get too fixated with ratios, although I understand that potential clients need & want to see them.
sluggo
Roundtable Knight
Roundtable Knight
Posts: 2987
Joined: Fri Jun 11, 2004 2:50 pm

Post by sluggo »

Managed Account Reports magazine, thinks they invented the "MAR Ratio". I've attached a sample report from them.

Regrettably, someone has put an incorrect entry into Wikipedia, which others are assuming is definitive. Wikipedia incorrectly states that MAR Ratio is (a) the same as Calmar Ratio; (b) an abbreviation of Calmar Ratio. Both of these statements are wrong.

The Calmar ratio uses the same denominator (max DD) as the MAR ratio, but a different numerator. Calmar uses the RETURN (not the compound annual growth rate) in the numerator. Thus the Calmar ratio gets bigger and bigger as time marches along. See the graph below, which I took from http://alumnus.caltech.edu/~amir/mdd-risk.pdf .
Attachments
MAR_report.pdf
A sample from "Managed Account Reports", inventors of the MAR Ratio
(34.76 KiB) Downloaded 1459 times
Calmar ratio & MAR ratio
Calmar ratio & MAR ratio
calmar.png (57.85 KiB) Viewed 12025 times
Post Reply