flat MAR

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painless
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flat MAR

Post by painless » Wed Feb 07, 2007 1:20 am

As I understand MAR is a function of CAGR and CAGR is a function of the percentage drawdown and whatever rules an individual deems appropriate when compounding.

Since I do not test using compounding I chose to calculate a flat MAR based on a fixed drawdown of 30% account size and no initial margin.
So it is flat %pa / 30 in that case. At least it allows easy comparisons across different market tests.

This might be a useful idea for others who use their own testing methods. Of course it is a bit redundant because the flat %pa serves the same purpose if the drawdown is uniform. However I have found from a few simple tests that the flat vs compound % values are not that much different so it may be a rough guide to compare against other quoted MAR values taking into consideration the %drawdown of course.

sluggo
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Post by sluggo » Wed Feb 07, 2007 11:48 am

What is the difference between "%pa" and "CAGR"? Could you post a little spreadsheet showing the two calculations on the same underlying data?

painless
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Post by painless » Wed Feb 07, 2007 12:26 pm

using the example at
http://www.investopedia.com/terms/c/cagr.asp

The drawdown would be $3000 at 30%.
flat %pa
capital = (MaxDrawdown / 3) * 10
100 * ((net / TradingDays) * 365.25) / capital
so 100 * 3166.66 / 10000
= 31.6%pa

the cagr on the website is 24.93
so MAR would be 0.83 and the flat number I come up with 1.05

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