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> I wanted ("buy at MACD crossing, sell at 3% profit or 10% loss"),
This is a troubling statement to me. Why would anyone in this world
want to take over 3 times the loss vs. a win? Your win rate has to
(realistically, before transaction fees) maintain an 80% rate in
order for you to have a winning system.
It's NOT about how often you win. It's about this:
Expectancy = (prob. of a winner) * (avg winner) - (prob. of a loser)
* (avg loser)
If the expectancy is not a positive value, you will lose at this
game. Look for systems that give you a 2:1 plus advantage of your
winners over your losers. The higher that ratio, the more losses
you can take. The trick is to take those small losses relative to
the big gains in order to finish profitable after a long series of
trades.
For example, I have a an ER2 swing system that wins, on average,
around 40% of the time, but the avg winning trades maintain a 3:1
advantage over the avg losing trade. Believe me, it's no fun
emotionally watching a system lose multiple times in a row, but when
you have this kind of expectancy:
Expectancy = (0.40 x 3) - (0.6 * 1) = 0.60
[here, "3" represents $3 for an avg. winner and "1" represents $1
for a avg. loser]
It means, in relative terms, that you can expect to see 60 cents
returned for every dollar invested.
I would never, ever, EVER be willing to lose more than I intend to
gain. It is a rookie mistake in this business to focus on a high
winning percentage as a primary factor in being successful. You
should focus on taking good risk/reward opportunities and be willing
to accept losing (a lot of the time) in order to win overall.
I realize this is an Amibroker thread, but please, remember that it
is only a tool and if no one ever tried to step in and get you to
think beyond the mechanics of using this tool, it would be a greater
disservice than saying nothing at all.
Steve
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