Monitoring Spreadsheet with DKPI, the ultimate Performance Indicator

This is a discussion on Monitoring Spreadsheet with DKPI, the ultimate Performance Indicator within the Forex Net Trap forums, part of the Specialists' Corner category; The ultimate Performance Indicator... introducing "DKPI" Dear fellow Net Trappers Marcus suggested that I copy this post from the AFFx ...

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Old Jun 18, 2011, 4:43pm   #1
Joined Jun 2011
Monitoring Spreadsheet with DKPI, the ultimate Performance Indicator

The ultimate Performance Indicator... introducing "DKPI"

Dear fellow Net Trappers

Marcus suggested that I copy this post from the AFFx Forum, where I originally posted it.

The second post in this new thread will provide and explain a Monitoring spreadsheet that I produced which calculates the DKPI as well as displaying results in a graphical form. I love graphs; I find them so much easier to follow than a list of figures.

In this thread I am going to explain an indicator that I created in 2010 (derived from first principles) that allows me to not only compare one system with another, but also to decide on any given system's merit regarding its abilitiy to make money.

After a couple of years of sifting through numerous systems for trading or betting, I was exasperated by all the hype surrounding each system on offer, plus the lack of sufficient information to judge a given system's merit, or true performance.

The first step was to decide on what I needed to know. I believe there are three categories to consider:
(i) ability of a system to make money if you keep strictly to the rules;
(ii) psychological factors that threaten implementation of the first category;
(iii) ease of use factors.

Category (ii), for issues like not taking trades or lowering your stake for fear of getting yet another loser, will be ignored in what follows.

Category (iii) for issues like missing a trade because of the school run, or making mistakes because a system is hard to follow, is completely ignored too.

I shall only deal with category (i). So, what's in category (i)?

Assuming you are OK with strict money management (i.e. I'll ignore this)....

Well, a graph of cumulative gains (pips) versus time contains all the information you need.
But it is not that easy to interpret, on its own. Even for someone used to looking at graphs.
Ideally, I should like a single number that sums up the system... So that's what I set about doing.

The information hidden in the above graph is the following:
(a) the %-age winning trades, or hit rate;
(b) the size of the average winning trade compared with the size of the average losing trade;
(c) the frequency of trading (e.g. how many trades per week).

And to judge a system, it is really important to take into account ALL THREE - (a), (b) and (c). But the ads never give you all three.

Introducing Doc Ken's Performance Indicator... DKPI.

A measure that correctly combines the three key factors (a), (b) & (c) is "the time it will take you to double your starting Bank, risking the same %-age of your starting Bank on each trade". I decided to go with 2% of Bank, since most professional traders like this amount, one fiftieth of your Bank.

I have derived a mathematical formula for the above measure, that I have christened DKPI, and I have included it in my Monitoring Spreadsheet that you will find in the second post on this thread.

DKPI, as calculated in my spreadsheet, gives you the number of months it will take you (if future performance matches past performance) to double your Bank, risking 2% of your initial Bank on each trade.

If you want to take note of this indicator, DKPI, we can discuss its use in future postings. It is set up in my spreadsheet for a 'past time period' that you need to increase as you fill in the spreadsheet. We can discuss that in later postings if you wish.

With large enough sets of trade data, it is possible to create a DKPI moving average, i.e. a graph of a 'monthly average' DKPI, e.g. DKPI 3 for three months' data, to give a rolling average from month to month (Jan to March; Feb to April, etc.). In this way you can see how constant (or otherwise) the performance is over time.

Having applied DKPI to some other systems, I have come up with the following (subjective) classification for a system's merit:

DKPI value over 25 is POOR
DKPI value under 20 is GOOD
DKPI value under 10 is EXCELLENT.

Needless to say, John Wheatland's stats give a DKPI under 10. For example, Early Riser gave DKPI = 8 for the time period May'10 to Dec'10 inclusive. Pretty cool, eh?

Any questions?..... Just fire away.

Ken.

PS For those who don't know, Early Riser is pretty similar to Net Trap.
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Old Jun 18, 2011, 5:13pm   #2
Joined Jun 2011
Re: Monitoring Spreadsheet with DKPI, the ultimate Performance Indicator

kenrawlings started this thread Monitoring Excel Spreadsheet for up to four instruments...

Hello all, it's me again!

I've upgraded the spreadsheet that I use for checking how I'm doing with different strategies. I have saved it as a 2010 spreadsheet. If you want a '1997 - 2003' version, just let me know and I'll upload one. Hope you like it.

I covered my DKPI in the previous post; it is an exclusive performance indicator that I derived from first principles that correctly takes into account hit rate, relative size of winning & losing trades, and trading frequency. It's the ultimate comparator for assessing the merit of different trading techniques.

Back to the spreadsheet.

The first tab is for data entry for Net Trap and three other instruments that you might trade, or variants of Net Trap; your choice.

The second tab shows a graph of how each pair is doing, plus the sum of all pairs/instruments being traded. The date now goes up to the end of 2011, and I have adjusted the graph to start on 20 June.

All the boxes in the first tab, like Average Win, %WINS, etc will give sensible numbers once you start filling in the spreadsheet. The Trade Data tab is not locked to protect the calculations etc, so BE CAREFUL not to write over any formulae; only put data in the wide colour coded data entry columns, OK? [That's columns C, F, I, and L.]

Just put your pips in the appropriate cells. For example, if I won 30 pips on Net Trap this coming Monday (20 June) I would put 30 in cell C253. For a 25 pip loss in, e.g. Pair 2 for the same day, I would put -25 in cell F253. All other cells can be left blank. Also remember to put the minus in for losing trades.

Finally, for DKPI to calculate properly, the value in cells G & H in row 5 must contain the correct value for the number of month's data you have. I have made it so that it will give more or less the correct value if there is one trade every day in column C, the Net Trap column. But you need to keep an eye on this and add or subtract a bit, without obliterating the formula, so as to give a decent representative value for how much time you have been trading since starting your record.

Clear as mud? Good.

Let me know what you think of it, if you like. Plus interest in my indicator, DKPI.

Happy trading,

Ken
Attached Files
File Type: xlsx TradeMonitorplusDKPI.xlsx (131.0 KB, 272 views)

Last edited by kenrawlings; Jun 18, 2011 at 5:14pm. Reason: Typo
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Old Jun 19, 2011, 11:30am   #3
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Re: Monitoring Spreadsheet with DKPI, the ultimate Performance Indicator

kenrawlings started this thread Just one final point about DKPI...

I like to keep things simple, and err on the safe side. So, two points:

i) I have noticed that my calculated DKPI tends to slightly over estimate the Bank doubling time;
ii) compounding effects are NOT included in DKPI.

Point (ii) implies the true Bank doubling time should be even shorter. In theory, by a factor of ln(2), or roughly 0.7 times shorter.

Dassittt.

Ken.

Last edited by kenrawlings; Jun 19, 2011 at 11:32am. Reason: Tidying up.
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Old Jun 20, 2011, 1:37pm   #4
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Re: Monitoring Spreadsheet with DKPI, the ultimate Performance Indicator

Cheers for this Ken, looking forward to downloading the spreadsheet and inputting some data.
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Old Aug 11, 2011, 10:47pm   #5
 
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Re: Monitoring Spreadsheet with DKPI, the ultimate Performance Indicator

Do you just input your daily pip total? no matter how many trades a particular system may have on any day.
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Old Aug 17, 2011, 9:37pm   #6
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Re: Monitoring Spreadsheet with DKPI, the ultimate Performance Indicator

kenrawlings started this thread Hi Steve,
I'm not used to this website. I think I might have replied twice already to your enquiry (not sure if the first attempt worked...). But since there is no sign of my reply here, I'll give what might be a third reply!
Data entry into the spreadsheet is for each individual trade. So, if you make more than two trades in a day for a given instrument, you'll need to insert extra rows to allow data entry, OK?
Remember to check the accuracy of the time period (expressed in months) for your trading record, as explained in spreadsheet posting.
Regards,
Ken.
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Old Aug 17, 2011, 10:24pm   #7
 
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Re: Monitoring Spreadsheet with DKPI, the ultimate Performance Indicator

Quote:
Originally Posted by kenrawlings View Post
Hi Steve,
I'm not used to this website. I think I might have replied twice already to your enquiry (not sure if the first attempt worked...). But since there is no sign of my reply here, I'll give what might be a third reply!
Data entry into the spreadsheet is for each individual trade. So, if you make more than two trades in a day for a given instrument, you'll need to insert extra rows to allow data entry, OK?
Remember to check the accuracy of the time period (expressed in months) for your trading record, as explained in spreadsheet posting.
Regards,
Ken.
Hi Ken,

Thanks for taking the time to reply much appreciated.
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