Do you evaluate a strategy in a backtest based on the cumulative returns generated by the strategy (i.e. looking at the cumulative returns of the trades that occur) or do you start with a certain dollar amount and look at the cash at end to compute the annualized return. The reason I ask is because things like position sizing and adding position to a certain trade are much easier to do when starting out with a dollar amount in a portfolio.
I tend to look at a strategy as a collection of trades with particular entry and exit points. If using multiple entry & exit points are used for each signal (adding positions or taking off positions for each signal) it is much easier to calculate returns per trade if looking at a dollar amount that was invested due to each signal.
I have seen both approaches being used and personally prefer using returns rather than starting with a dollar amount. Just curious to see how people approach this and why.