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Paul,
I haven't followed this thread seriously, but let me do the math, and you'll
crunch the numbers.
(1) Expectancy = (WinRatio * AverageWin) - (LossRatio * AverageLoss)
(look page 138)
Nice formula, but you can try it the easy way:
(2) Expectancy = NetProfit / NumberOfTrades = AverageTrade
Now, if you have a negative net profit you will have a negative expectancy.
Expectancy is nothing but the average return of a trade.
Had few troubles understanding Tharps words myself, did the math, everything
was clear. The concept is described more complicated than it really is.
Maybe you can improve your system with a negative net profit (i.e. negative
expectancy) by using money management, but IMO it's a very bad start. Why not
improve your system first, i.e. improving WinRatio or AverageWin and then
multiply the results? Always remember, the biggest drawdown is the one to
come...
Crunch the numbers, post the results, I'm interested.
Soeren
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