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...and people say the omega list is weak. Ha!
I want to thank Val Clancy and Bob Fulks for their excellent formulas.
Without the internet and mailing lists, such problems takes weeks and months for solutions.
But with the instant transfer of information, problems get solved quickly.
Is the internet great or what!
Andy Dunn
In this specific case:
( .99^n/2 - 1 ) *100
where n = total number of trades.
Val.
Andy Dunn wrote:
> Can anyone write me a formula for the following.
>
> I have a system and the average WIN is 2X the average LOSS
> The system WINS exactly 50% of the time
> Let's say I start with $1M
> Each time I trade, I risk 1% of the bankroll (starts at 1M then goes up with each trade)
>
> Can anyone write an algebraic formula that will determine the yearly Rate-Of-Return depending on HOW MANY trades this system does each year?
>
> thanks
>
> Andy
At 10:17 PM -0500 12/15/98, Andy Dunn wrote:
>Can anyone write me a formula for the following.
>
>I have a system and the average WIN is 2X the average LOSS
>The system WINS exactly 50% of the time
>Let's say I start with $1M
>Each time I trade, I risk 1% of the bankroll (starts at 1M then goes up
>with each trade)
>
>Can anyone write an algebraic formula that will determine the yearly
>Rate-Of-Return depending on HOW MANY trades this system does each year?
You don't say what the loss percentage is. Assume you lose L (as a
fraction) of your capital on each losing trade and win 2*L (as a fraction)
of your capital on each winning trade. Assume trades occur in pairs - one
win followed by a loss. Then:
End = Start*((1-L)*(1+2*L))^(n/2)
For example, if the loss on a losing trade ("L") is 0.5% of your capital (L
= 0.005)
and the number of trades in the year ("n") is 400
End = Start * ((0.995)*(1.01))^(400/2)
= Start * 2.68
So the ending value would be 2.68 times the starting value or a profit of
168% in the year.
This assumes you adjust the trade size as you capital increases/decreases.
Hope this is what you meant.
Bob Fulks
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