|
PureBytes Links
Trading Reference Links
|
<FONT face=Arial
color=#0000ff size=2>Herman,
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>Mathematically speaking Van Tharp is
correct.
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>Here's a good way of figuring it out in
Excel.
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>Let's say you want to have a trading system that generates
1000 trades a year. Let's say you want to only ever see a long losing run
once per yer. Your system is 50% accurate (wins 50% of the time).
What's your maximum losing streak on the basis of these
odds?
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>9.965 trade losing streak
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>What about if your system was 60%
accurate?
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>7.5 trade losing streak.
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>What's the formula?
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>In Excel to determine the maximum losing
streak:
=LOG(<SPAN
class=798540601-10032004>PLS,<SPAN
class=798540601-10032004>PL)
<FONT face=Arial color=#0000ff
size=2>where
PLS =
Probability of losing streak (eg 1/1000 = .001 )
PL =
Probabilty of loss (eg 0.5)
<SPAN
class=798540601-10032004><SPAN
class=798540601-10032004><SPAN
class=798540601-10032004><FONT face=Arial
color=#0000ff size=2>
Now
these are all theoretical formulae of course on the basis of INDEPENDENT
events. There's reams of material out there to say that trading isn't
indepdendent. <FONT
face=Arial color=#0000ff size=2>But at least it's worthwhile knowing what the
theory says when you're backtesting your trading system.
<SPAN
class=798540601-10032004><FONT face=Arial color=#0000ff
size=2>
Cheers,
Richard Dale.
Norgate Investor Services- Premium
quality Stock, Futures and Foreign Exchange Data for markets in
Australia, Asia, Europe, UK & USA -<A
title=http://www.premiumdata.net/ href=""><FONT
face=Arial size=2>www.premiumdata.net
<FONT face=Arial color=#0000ff
size=2>
Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Yahoo! Groups Links
To visit your group on the web, go to:http://groups.yahoo.com/group/amibroker/
To unsubscribe from this group, send an email to:amibroker-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
|