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dear ross:
what you are asking for is the financial equivalent of the economic
utility function. it is almost totally personal and individual. ask
100 different traders and you will get 100 different answers.
the answer varies according to risk/reward preferences to time horizon
to equity drawdowns to activity to hours in the day to trade.
the ONLY requirement is that your system have a positive expectation.
by that is meant that the average statistical profit x your percentage
winners - the average statistical loss x your percentage losers MUST be
positive.
only YOU can decide the rest for yourself.
regards,
brad yoneoka
Ross Bond wrote:
Would anyone care to share their views on what constitutes
acceptable system performance: what baseline values they consider
would make a system a candidate to move from testing into real
trading?
(If there is interest in this thread we may need to break it into
Position trading and Day trading.)
I offer the following for consideration.
Performance Statistics for Position trading:
Statistic Value Description of Stat
================================================================
Mathematical Expectancy > 0.6 $ return for $ risked
Opportunity * Expectancy > 2.0 Opportunity = Trades per Year
Win/Loss Ratio > 2.0 [ AvgWin / AvgLoss ]
Profit Factor > 3.0
Annual Return on Account > 50% account = [(Margin*4)+(MDD*2)]
Net Profit to MDD Ratio > 3.0
Percentage DrawDown < 30%
Average Trade $$ > $500
I understand that there are many performance statistics that can be
generated.
What I am trying to determine is:
* what statistics are truly useful; and
* what base values are considered acceptable.
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