A good trading system

J

Jerry030

Question:

What do you consider a good trading system in terms of
two, among many, measures:

1) Win/Loss Ratio in dollars

2) Annual return on total account capital

For example: if a system won $7,000 while loosing $3,000
it would have a 70% Win/Loss ratio (7/(3+7) = 0.7

If it stated the year with an account value of $20,000 and ended it with an account with $40,000 it would have a 100% annual return on account.

It would be interesting to see how opinion varies among different types of traders such as:

Chartists
Technical
Fundamental
Mechanical System
Discretionary
Quants
 
Quote from Jerry030:



For example: if a system won $7,000 while loosing $3,000
it would have a 70% Win/Loss ratio (7/(3+7) = 0.7

Quants
More...

Be careful with the wording because an account that won $7k while losing $3k would be up net $4k. You might mean 7 winners out of 10 but then you have to consider how much you win and how much you lose (i.e. 7 winners of $2k versus 3 losers of $4k).
 
Thanks for pointing that out. What I'm focused on is W/L Ratio in dollars only. The number of trades is only secondary.

If you had 5 winning trades that made $1000 each and 5 loosing trades that lost $100 each I'd say that's good.....or a W/L ratio of around 90%
 
Quote from Jerry030:

Thanks for pointing that out. What I'm focused on is W/L Ratio in dollars only. The number of trades is only secondary.

If you had 5 winning trades that made $1000 each and 5 loosing trades that lost $100 each I'd say that's good.....or a W/L ratio of around 90%
More...
Whoops! I'm done with this thread.

M
 
Quote from Mathemagician:

None of those things matter on their own.

M

If you can double your total capital every year, not much else matters.

One can muse about Sorentino ratios or percent of MFE captured
but if you're playing the game for money then net profit over the long term is what really matters as you can spend money. You can't buy much with a good Sharpe ratio.
 
So doubling your net in one year with a couple of 50% drawdowns in that time would be considered okay for you?

I could possibly double my capital tomorrow.... but at the risk of blowing out.
 
Assuming that at the end of the year your account in total has twice as much as you started with then if you had 2 losses in a row or 6 or had 4 draw downs of 7% each or of one of 28% is secondary.

What are your criteria for a good trading system?

It would be great to trade a system that has no drawdown’s ever, has lots of big winners and only a few tiny losses, captures 95% of MFE and on and on, but absolute perfection is hard to come by. It’s easy to get so tangled up in individual trees that you loose track of the forest.
 
Quote from Jerry030:



If you can double your total capital every year, not much else matters.

One can muse about Sorentino ratios or percent of MFE captured
but if you're playing the game for money then net profit over the long term is what really matters as you can spend money. You can't buy much with a good Sharpe ratio. [/B]
More...


yer but you dont know your going to double your money. its about confidence in your system.

and those ratios etc help you determine if you've got a good chance of producing similar results in the future. what good is a system if it is not robust.

id pick a system with 50% profit and 30% intraday drawdown rather than a system that returns 100% with a 60% intraday drawdown.

i guess what im trying to say is that profit is easy to backtest for. a good system is not.
 
Quote from Jerry030:

Thanks for pointing that out. What I'm focused on is W/L Ratio in dollars only. The number of trades is only secondary.

If you had 5 winning trades that made $1000 each and 5 loosing trades that lost $100 each I'd say that's good.....or a W/L ratio of around 90%
More...


:confused:

W/L ratio is still 50%.

focus more on the 'expectancy per trade'.
 
You must log in or register to reply here.
Back
Top