I disagree with ranking systems by % Return. It encourages trading with large size. How many traders trade 50 lots ES?
Sure a best system can double your 100K in 1 month, but realistically looking at win/loss etc would be better.
I understand that you can use the advanced to sort on each column, I just disagree with the “Hot Lists” and it’s “Best Systems”.
Thoughts?
How many traders trade 50 lots ES?
The person who taught me to trade, was trading 300 ES contracts at one time. He may have traded larger size.
On the other hand, I would like to see profit as a percentage of drawdown. Thats what really counts for most traders, me included.
Van K. Tharp uses what he calls an “Expectancy” factor to determine the value of a system. It takes into account % wins, average $ per win, max. $ per win, average $ per loss, and max. $ per loss. From this a person can determine expected rate of return, maximum drawdown, etc. based on statistical analysis. He stresses that most people risk too much per trade, leaving them open to very large drawdowns during a losing streak, and possible failure. Consistency is the key. I feel a system has to produce better than 50% wins to be good in the long run.
It really depends on who you are and how good you are. My friend trade around 200 NQ each trade. Now I think he trades at larger size.
The world is so big, there are many things we just don’t know. Everything impossible is possible.
Using performance statistics based on account equity and expressed in percentage terms, such as many of the statistics shown below, makes it possible to better evaluate the equity curve and the corresponding trading system or method.
TRADING PARAMETERS…
Initial Account Equity: $107000.00
Commissions and Slippage: $0.00
Equity Crossover Rule in Effect
Position Sizing Method: Fixed Percent Risk
Fixed Fraction: 2.00%
PROFIT SUMMARY…
Total Net Profit: $120685.00
Gross Profit: $128187.00
Gross Loss: -$7502.00
Profit Factor: 17.0870
Highest Closed Trade Equity: $227685.00
Lowest Closed Trade Equity: $107000.00
Final Account Equity: $227685.00
Return on Starting Equity: 112.79%
TRADE RESULTS…
Number of Trades: 15
Number of Winning Trades: 12
Number of Losing Trades: 3
Percent Profitable: 80.00%
Max Number of Contracts: 17
Minimum Number of Contracts: 5
Average Number of Contracts: 12
Largest Winning Trade ($): $42828.00 (27.38%)
Largest Winnning Trade (%): 27.38% ($42828.00)
Average Winning Trade ($): $10682.25
Average Winning Trade (%): 7.16%
Max Number Consecutive Wins: 6
Largest Losing Trade ($): -$6528.00 (-2.87%)
Largest Losing Trade (%): -2.87% (-$6528.00)
Average Losing Trade ($): -$2500.67
Average Losing Trade (%): -1.11%
Max Number Consecutive Losses: 2
Average Trade ($): $8045.67
Average Trade (%): 5.50%
Trade Standard Deviation ($): $13171.32
Trade Standard Deviation (%): 9.11%
Win/Loss Ratio ($/$): 4.2718
Win/Loss Ratio (%/%): 6.4703
Return/Drawdown Ratio: 39.2181
Modified Sharpe Ratio: 0.6045
DRAWDOWNS…
Number of Closed Trade Drawdowns: 2
Average Drawdown ($): -$3751.00
Average Drawdown (%): 1.66%
Average Number of Trades in Drawdowns: 3
Worst Case Drawdown ($): -$6533.00 (2.88%)
Trade Number at Trough: 11
Number of Trades in Drawdown: 5
Worst Case Drawdown (%): 2.88% (-$6533.00)
Trade Number at Trough: 11
Number of Trades in Drawdown: 5
There are a number of statistics that are important if you are putting your hard-earned money at risk. Maximum drawdown is
important because that, plus required margin, is the absolute minimum amount of money one should have in their account to avoid a margin call with reasonable probability. The average profit per trade is important to know because you must cover your transaction costs, commission plus slippage, before you can start making money for yourself. The number of consecutive losers is a test of how strong your stomach must be to trade the system.
Taking away all the details of the particular system, there are two
statistics that enable you to assess what performance you can
expect. These are the percentage of profitable trades and the profit factor. It is desirable to have as high percentage winners as
possible, but not necessary to be greater than 50% to be profitable
if you make more on winning trades than you lose on losing trades.
Profit Factor is the ratio of Gross Winnings to Gross Losses. In
terms of gaming theory, it is the payout probability. By determining whether a trade is a winner or a loser using a random number generator, applying the payout probability to each trade, and summing the randomly selected trades we can provide realistic expectations of the equity growth produced by the system will look like. Only in this sense can randomization be introduced to establish performance. Simply winning or losing is not a random occurrence.
From a statistical standpoint, assuming an even chance of loss or
gain on an investment, low-volatility investments offer significantly
higher returns than do high-volatility strategies. A low-volatility
trading system beats a high-volatility system 70% to 80% of the time when given the same sequence of trading results. In winning systems, however, game theory shows that once the probability of winning exceeds 56%, high-volatility strategies prevail.
Also,
Dr. David Druz says, “The more robust a system, the more volatile it tends to be! This is because robust systems are not optimized to particular markets or market conditions. The converse is also true. You can design systems with excellent returns and low volatility on historical testing, but which work only for given periods in given markets. These systems tend to be curve-fit or market-fit and are not robust.” This quote comes from his article:
http://www.tacticalnet.com/cgi-bin/t2.exe/VolatiltiyPaper.htm
rgds, Pal
Midas Value
I agree Brian.
If you make 100% in the first 11 months of trading your system and lost 50% in the final 12th month, how much have you made. The answer is 0%, but your %wins may be very high. Yet, if one is not playing for optimal profits, according to Ralph Vince, they belong in an insane assylum. It all boils down to market timing; as they say timing is everything. Timing is more important in general than selecting the markets appropriately. A trader has to optimize timing as well as optimize bet (position) size for optimal profits. To lose money because a trader is ignorant of his systems best parameters is foolish.
rgds, Pal
Midas Value
