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A very nice overall measurement to use for system robustness is the
Sharpe Ratio. Any book on trading stats will give you the formula.
Basically, it is a volatility weighted measure of return which also
considers the overall profit against a "non-risk" yield. (usually T-Bills)
Walt Downs
CIS trading
-----Original Message-----
From: cb <cpbow@xxxxxxxxxxxxx>
To: ZooKeeper <rsos@xxxxxxxxxx>
Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Friday, August 21, 1998 10:47 PM
Subject: Re: is profit factor the best measure
>ZooKeeper wrote:
>>
>>
>>
>> How about ROA? Anybody besides me uses Return on Account? It is the
>> NetProfit divided by acount size required (which includes drawdown per
>> contract and marginper contract). Any opinions?
>>
>>
>
>Goodness knows i am not qualified to say, but it seems like profit /
>dd+margin is the best measure of bang for the buck. If one system has a
>profit of $2 but a dd of $25 and another has a profit of $1 with a dd of
>$5 you could actually make more money with the second one if you have a
>limited account ( I think).
>
>Maybe profit factor is a good measure of sensitivity of the results to
>your assumptions about slippage and comm? If each trade is barely more
>profitable than the losses, then if you are slightly wrong about your
>slippage it might actually lose. So a profit factor of, say 1.1 would
>be a no-no. Opinions on what it should be?
>
>Now if i only had a testable system.... still working on some ideas
>since I'm not doing much trading at all. :|
>
> Conrad Bowers
>
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