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For the same reasons that you rank anything else. So you can focus on the best and discard the ones that aren't worth the time and effort. What does that mean?

Thanks. Fortunately I figured out what was nagging at me so no need for gutfeel empiricism. Incidentally the CL data you included is insufficient for calculation of the Kelly fraction. Weird but true. SAS == 6*k*E*(1+|E|/sigma)*sgn[ E ]*min[ 1, N/1000 ] , where k is...

(1-.235)^5 = 26% of your trading account remaining after this 3-out-of-a-billion chance event.

The purpose of the formula is to rank the systems that work. Thanks all the same.

I think they're talking about corporate strategies, not trading strategies. Thanks all the same.

Isn't that already covered by the expectation? If not, how would you incorporate P&L into the formula? Thanks.

I have a feeling that the formula is still incomplete. Any ideas? TIA.

I don't think you know how an edge works. It gives you a statistical slant towards growth over time in no small part because the other traders don't know about it. The history of trading is replete with strategies that worked when they were new but became ineffective when they were publicly...

I've decided to get rid of the coefficient (8) in the original SAS formula. SAS == k*E*sgn[ E ]*min[ 1, N/1000 ] SAS[ +2, -1 ] = 0.125

Semantically speaking, I would say that system 1 and system 3 are not identical but they are equivalent in performance. Thanks to stevegee58, I figured out how to improve my performance measure. Rather than the Kelly fraction times the average win, much better is the Kelly fraction times...

Sure, have at it. :)

It could be both, no need to be either-or.

The System Performance Score is now obsolete. It has been replaced by the System Achievement Score (SAS). The System Achievement Score is SAS = 8*k*E*sgn[ E ]*min[ 1, N/1000 ] , where k is the Kelly fraction aka the solution to the Kelly equation (below), E is the...

For the umpteenth time you are just plain wrong. And evidently you are unteachable as well. You are thus exposed as a crank. There's not a bigger waste of time in humanity than cranks, although trolls are frequently just as useless. Welcome to my ignore list, crank.

SAS == k*E SAS(A) = (.55/407 - .45/433)*(.55*433 - .45*407) = 0.017165 SAS(B) = (.10/50 - .90/1000)*(.10*1000 - .90*50) = 0.0605 System B is much more attractive.

It "admits" no such thing. What it reveals is that this "bright red line" you're trying to draw between risk management and profit optimization is delusional. The two are not mutually exclusive, they are connected. You maximize profits in part by minimizing risk. It's the old...

Do you seriously believe a single player at a blackjack table playing 2 or more hands has uncorrelated hands?? Uncorrelated trades would require no modification to their Kelly fractions. Moreover, if you can't figure out how many trades you have going at any one time, you have no business...

The Bad Kelly formula requires the winrate and the win/loss ratio. The LessBad Kelly formula requires the winrate, the average win return and the average loss return. The best Kelly formula (undisclosed) requires none of those, just the trade returns. Ergo it is adaptive aka instantly...

Excellent point. How much you can expect to win per unit risked may be the best way to go. But here's the fly in the ointment. System 3: There is a 60% chance that you win 100 times your bet ; there is a 40% chance that you lose 100 times your bet. The expectancy of system 3 is 20...

Consider the following two theoretical systems. System 1: There is a 60% chance that you win your bet ; there is a 40% chance that you lose your bet. System 2: There is a 3% chance that you win 100 times your bet ; there is a 57% chance that you win your bet ; there is a 38%...