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Eric Severance

Member

Posts: 23

Joined: 10/11/2012
Location: Incline Viallge, NV

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Subject : CPC Index
Posted : 4/11/2014 2:50 PM
Post #29745 - In reply to #29721

A few years ago, in my backtesting, etc., I had been looking for a good way to summarize performance.

Sunny Harris, a real backtesting guru, developed what she called the CPC Index - a good tool IMHO, that I’ve been using ever since.

The CPC Index (from Sunny Harris’ book Tradestation Made Easy):

I attached the chapter (4th page has formula, etc.) from her book where she talks about this…

But here’s the formula:

CPC = P * PF * R

Where:
P = Percent Profitable
PF = Profit Factor
R = Ratio Avg Win/Avg Loss

Profit Factor is calculated by dividing Gross Profit by Gross Loss. By definition, a value greater than 1 means the trades have a positive net profit.

A CPC score above 1.2 is considered “safe”. Over 2, better.

As an example, I ran the calculation on a test of SPY (long only) on a RTM strategy of mine (below): came out well (CPC score of 2.98), which correlates well with this strat’s equity curve, etc..

*** Multiple ways to use this. For one, imagine if we could have the CPC score as a metric. as a tool to rank Portfolios and strategies on, etc. Maybe it could also be run, say once a week or month, on each symbol in a standard list (i.e. SP500), for XYZ strategy, then take the top CPC scoring ones and use those as a dynamic list!



See what you think.

Another useful performance measurement and comparison tool is the “Student T” test. Perry Kaufman speaks of it in his book on Trading Systems. Can send if interested.


Regards,

Eric Severance


[Edited by Eric Severance on 4/11/2014 2:59 PM]

Attached file : TS_Perf_Rpt_wCPC.png (362KB - 1493 downloads)
Attached file : Harris - CPC.pdf (1995KB - 459 downloads)

Deleting message 29745 : CPC Index


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