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Re: Risk/Reward



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In a message dated 6/16/00 11:48:03 AM Pacific Daylight Time, 
prosys@xxxxxxxxxxxxxxxx writes:

<< uh....Chuck....care to qualify that statement.....
 I think we all need a system with +50% winners and a +3:1 win/loss ratio.
  >>


Sure, the higher the ratio the better.  However, even a 50% winning system 
would be highly profitable with a 2 to 1 ratio.  A 75% winning system would 
make money with a 1 to 1 ratio.  We need to look at the total picture and not 
just the size of the winners vs the losers.  Although this measurement is 
important there are other factors that may be more important.


For example we might want to look at the frequency of trading because this 
often overlooked factor contributes significantly to total profits.  A system 
that had 60% winning trades with a 1 to 1 ratio might make twice as much as a 
75% winning system with a 4 to 1 ratio if the 60% system traded much more 
frequently.


Chuck LeBeau
traderclub.com