What is Robustness of a Trading Strategy

A webcast presentation originally by Alexey Krishtop originally held on March 8, 2017 as part of the CMT Association’s Educational Web Series.

In our previous webinars we already considered various important tools and methods used in systematic trading and development of trading strategies. We noted that systematic trading in general is based on quantitative analysis rather than qualitative assessment, and therefore it’s always important to know how to express our requirements to the trading strategy performance in form of numbers, and not only emotions. When most people encounter a problem of assessing the performance of a trading strategy they normally start with visual analysis of equity curves — this is something that looks understandable and fair enough. At least this methods allows to quickly reject strategies which lose money long term. However when it comes to a problem of comparing two strategies with positive performance simple visual analysis may become quite misleading. In this webinar you we will discuss the robustness of trading strategies. We will consider various metrics which help assessing the robustness quantitatively and be as objective as possible with the assessment. Besides that we will learn that sometimes a strategy may be robust even when its equity curve looks unpleasantly, and vice versa. You will understand why robustness is a measure of trading strategies upside potential and possible stability in the future