Unreasonable Return Rates?

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Unreasonable Return Rates?

posted Apr 23, 2015

Hi, I'm new to quantopian and recently wrote my first simple algo. Seeing that my dad is in the finance and economics field and that I have some common sense, I began to think that a 95870.2% return rate with a 6335.3% drawdown didn't seem reasonable on a 100$ investment.

Can someone explain to me what exactly drawdown is, how my return rate is effected by this, and what exactly could be causing this unreasonable return rate?

Thanks.

2 responses

Michael Van Kleeck

Drawdown is how much your equity decreases from its peak. Your huge return is probably due to large amounts of leverage that wouldn't be possible in real trading. If you're using the "order" method, try "order_target_percent" instead. You can track your leverage with: record(leverage=context.leverage)

Richard Shoemake

Make sure you aren't over ordering. I agree with Michael above. Use the order_target_percentage of 1 and -1 depending on whether you're going long or short 100%. Use less if you prefer like 0.5 etc.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.