What does Win% = 38 tell us?

T

trd

I recently asked a trading guru about a system having a Win% of only 38%
and he wrote to me the following:

"A system that generates 38% profitable trades averaging $250 per trade, against 62% losing trades averaging a loss of $75 per trade => would be a very viable system."

He is very right, IMO Win%, much like PF, does not mean much.

IMO, the most important characteristics of a system are:
Number of differrent years tested
AnnualAvgProfit% (with StdDev, Min, Max)
AnnualAvgMDD% (with StdDev, Min, Max)

Any other?
 
His argument can best be summarized by a simple probability equation:
Expected rtn = avgwin*%wins -avgloss*%losses
Taken in context, he's absolutely correct.

In theory, you could have 1 win trounce 99 losers, in which case hit rate is a bad metric. You could also have one loss trounce 99 winners (which is more likely a scenario in reality based markets), in which case, hit rate is also a bad metric. A more important metric, is how well does predicted performance match out of sample performance over large sample space. And how do you prepare for catastrophic scenario #2. I don't see these metrics much in the TA realm. But, they can be measured. Ask him what metric he uses to measure that.
 
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