Likewise, just because a market has a high positive contribution doesn’t
mean that it was the market that functioned best throughout the entire testing peri-
od. It might have been that it didn’t work at all for the first half, when the portfo-
lio equity was relatively low but increasing because of profits from other markets.
However, it might have functioned very well during the second half, when the
portfolio equity was relatively high, which would have allowed for larger positions
and thereby larger profits during this period.
The spreadsheet allows you to test this by setting the market weight to zero,
as in Figure 27.13. Doing so for, for example, all losing markets in a portfolio will
most likely produce new losing markets out of the original winning markets.
Excluding these markets will most likely produce a new set of losing markets, and
so on, no matter if these markets had positive average profit per trade when ana-
lyzed in TradeStation.
Sometimes, taking away the losing markets will even lower the final profit
for the portfolio, and sometimes it’s even a good idea to throw in a couple of los-
ing markets to the mix, to either increase the final profit for the portfolio or even
out the equity growth, which would result in a higher Sharpe ratio and the possi-
bility for more aggressive trading.
In short, because all markets are dependent on one another, there are no sure
winners or losers. It all depends on where and when all individual markets’ prof-
336 PART 4 Money Management
FIGURE 27.12
Cumulative monthly returns from spreadsheet.