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Market System Analyzer (MSA) is a trading software application that calculates detailed performance statistics for an existing trading system or method. The performance statistics are designed to properly account for position sizing and trading equity to provide a more accurate trading simulation than programs based on a fixed number of shares or contracts. Market System Analyzer can be used to evaluate trading systems and methods, optimize trade sizes, perform position sizing calculations on a trade by trade basis, and perform Monte Carlo simulation and other types of analyses.

Try MSA for free. Click here.

The performance summaries available in most trading software packages, such as TradeStation,™ are generally based on the assumption that a fixed number of shares/contracts is being traded; e.g., one contract per trade. Performance statistics such as the average trade, largest loss, and drawdown are quoted in dollars. However, when position sizing is incorporated into a trading simulation, the number of contracts or shares tends to increase over time as trading profits accrue.

As the number of shares/contracts increases, so does the drawdown. A drawdown of 10% is $3,000 on a $30,000 account, but if the account grows to $200,000, a 10% drawdown is $20,000. Given the dollar value of the drawdown without the corresponding percentage, is that $20,000 drawdown a 67% drawdown on the starting equity of $30,000 or a 10% drawdown on the same account after it grew to $200,000? The point is that the more important statistic is the percentage drawdown, not the absolute dollar value.

The same is true of the average trade size and a number of other statistics. The solution is to track trading results relative to account equity. That way, regardless of whether the position sizing is based on one contract or the fixed ratio method, the performance statistics will be meaningful and the account size and position sizing will be properly represented.

Market System Analyzer provides a detailed list of performance statistics based on account equity and expressed in percentage terms. The statistics are computed for the current sequence of trades, as displayed in the main chart window. If any change is made to the current sequence, such as changing the position sizing method or adding a dependency rule, the performance statistics are automatically updated. The performance statistics can be viewed at any time by selecting Performance Statistics from the View menu. An example is shown below.

The Performance Statistics window in Market System Analyzer displays the performance results for the current sequence of trades.

If desired, the performance statistics can be exported to a text file via the File menu. Selecting Help will bring up a help window with a description of each statistic.

Some of these statistics are also computed during the Monte Carlo analysis. See Monte Carlo Analysis.

To learn more about MSA, click here.

To see how to optimize system parameters and position sizing parameters simultaneously using Market System Analyzer and TradeStation, click on the Next button at the bottom of the page or click the Buy Now button below to download your own copy of Market System Analyzer.

Market System Analyzer 2/3

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For a general article on performance statistics for trading, click here. For a full list of available trading articles, select the Article Library link at left.