|
PureBytes Links
Trading Reference Links
|
Gabriel,
>I do not see what is so wrong with upward volatility. I can see in the
>extreme case that you have one trade that makes >60% of your returns
>over a long time frame you may not want to trade it. But what if 10 out
>of 100 trades make 90% of your return, depending on how bad the
>drawdowns are, this strategy seems fine to me. Incidentally, Alex's
>website is amazing and anyone interested in this topic should definitely
>check it out and save themselves a lot of time and effort. Thanks Alex.
You're welcome. Incidentally, not everyone
agrees with my assessment of the Sharpe Ratio on
http://unicorn.us.com/trading/expectancy.html -- in particular some
whom I consider experts more knowledgable than me. I think it comes
down to a matter of opinion of what constitutes a better trading
system: one that maximizes equity growth per dollar risked, or one
that has the most consistent returns.
In the extreme case of a system that has no losses whatsoever, you'd
get a lower sharpe ratio on a system that consistently has variable
returns higher than the risk free rate, compared to a system that
has low non-varying returns. Either system has no downside risk,
yet the one that grows your equity the fastest is penalized. To me,
this doesn't make sense.
-Alex
|