|Time Window Analysis|
|1 Month||3 Month||6 Month||12 Month||18 Month||2 Year||3 Year||4 Year||5 Year|
The Time Window Analysis consists of a table and a chart that graphically shows performance and time. The chart plots the "Percent Profitable" and "Average" rows from the table.
A time window is a designated amount of time. This window rolls throughout time so you can see what your expected return would be for any given time period. As an example Jan 2001 to Jun 2001 is one 6 month period. The next 6 month period begins with Feb 2001 to Jul 2001. This rolling continues throughout the entire history of the data until all 6 month periods are examined.
The best use of the chart and the data table is to determine how much time is necessary to dedicate to a trading system. Each time period has a given percentage of profitability. In the table above, this system has a 63.25% probability that any 1 month period will be profitable. Any 3 month period has a 70.43%. This just means profitable but not how profitable. The "Average" row tells us this. The 1 month period has a 63.25% chance of being profitable and that expected return is 3.07%.. The 3 month time period has a 70.43% chance of profitability with an expected return of 9.24%.
The Graph visually represents this data. The spokes radiating from the center are the numbers of months or rolling periods of time. This graph goes from 0 months to 60 months(5 years). The vertical scale of numbers are percentages. This scale serves a dual purpose representing both the "Percent Profitable" and the "Average" gain of the specified time period.
The pink circle represents the "Percent Profitable". Use this to determine how much time is needed to dedicate to trading a particular system. Since the time spoke represents any X period of time throughout history we can surmise that if we trade the system for that length of time we have a Y% chance of being profitable.
The blue line shows what the expected percentage return would be for that time period or the "Average" for the time peroid. The blue line can be used in the same way as the pink circle. If we trade the system for X length of time then we should have a Y% expected return. This is why the percent scale goes above 100. As returns can be greater that 100% of initial equity.