## flat MAR

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.
painless
Roundtable Fellow
Posts: 59
Joined: Tue Nov 14, 2006 12:52 pm

### flat MAR

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
Roundtable Knight
Posts: 2986
Joined: Fri Jun 11, 2004 2:50 pm
What is the difference between "%pa" and "CAGR"? Could you post a little spreadsheet showing the two calculations on the same underlying data?

painless
Roundtable Fellow
Posts: 59
Joined: Tue Nov 14, 2006 12:52 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