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One can "look at it" any way one wants.
Over a short period of time almost statistics are meaningless ...
Let's look at a trader who over a longer period of time has a 75/25
win/loss ratio and starts w/$1000. Let's assume he has 3 winning
trades of 10% each followed by a losing trade of 10% and then the
cycle repeats.
After 100 trades he has $117,391 w/the average win being 2446.55
(10%) average loss being 2682.53 (10%) ...
You prefer an expectancy calc of:
0.75 * 2446.55 - 0.25 * 2682.53 = 1163.90 i.e. < 1% of his equity
or:
0.75 * 10 - 0.25 * 10 = 5% i.e. ~ $5869
If we take the same example over 500 trades then we have an
expectancy that's around 0.1% using $ to the same 5% using %.
The longer the example, the more out of whack this gets ...
--- In amibroker@xxxxxxxxxxxxxxx, "sebastiandanconia"
<sebastiandanconia@xxxx> wrote:
> Is it? I'm not sure.
>
> Example:
>
> A trader has a system with a 50/50 win/loss ratio. Starting with
> $10,000, he has three losing trades in a row with each costing him
> 10% of his existing equity. Three losses, each 10%, $1,000, $900,
> $810. Average loss -10%, or (1000+900+810)/3 = $903.33.
>
> From his current equity of $7290, he has three winning trades that
> bring him back even to $10,000 (it's $9999.87, to be precise).
Each
> trade is a win of 11.111% of his existing equity,
> (809.99+899.99+999.90)/3 = $903.29.
>
> Using an expectancy formula calculated with percentage profit of
> winning and losing trades would lead him to believe he had an edge
of
> 1.111%, but he obviously doesn't since the average dollar amount of
> his wins and losses are virtually the same.
>
> Or if he took a larger hit of 30% on his first trade, bringing his
> equity down from $10,000 to $7,000 and then had a big win of 42.85%
> bringing him back even, he'd think he had a REALLY big edge when in
> reality the dollar amount of both trades were the same.
>
> Or am I looking at this the wrong way? I'm not exactly a
bookie.:)
>
>
> Luck,
>
> Sebastian
>
>
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <ftonetti@xxxx> wrote:
> > Using $ as opposed to % in formulas like this is really only good
> for
> > the futures traders who tend to trade the same number of
contracts
> or
> > dollar amounts for awhile ...
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "sebastiandanconia"
> > <sebastiandanconia@xxxx> wrote:
> > > Sorry, I had to edit my first reply. Let's try this again.:)
> > >
> > > In your expectancy formula, are you calculating Avg Profit and
Avg
> > > Loss as % (as it appears in your formula)? Because expectancy
> > > formulas quote the profits and losses in dollar amounts, like
> this:
> > >
> > > (%Wins x Avg Profit $) - (%Losses x Avg Loss $)
> > >
> > > Could this account for the difference of opinion that you and
> Tomasz
> > > have? Expectancy tells you what dollar amount you can expect to
> win
> > > or lose per dollar amount risked. However, the dollar amount
> > risked
> > > doesn't vary with leverage. Buying $10,000 worth of a mutual
> fund
>
>
>
> > in
> > > a cash account puts $10,000 at risk, but so does buying $10,000
> of
> > > that fund on margin with $5,000, it's just that you're
borrowing
> > the
> > > other $5K. Same thing when buying $10,000 worth of a mutual
fund
> > > that uses 2X leverage, still the same $10K at risk. The amount
> of
> > > money risked is always the same, so the expectancy has to be
the
> > > same.
> > >
> > >
> > > Luck,
> > >
> > > Sebastian
> > >
> > >
> > >
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