What is shape and realism factor

My system has shape 8.0 and realism factor 0.0

Is it good or bad? Where can I find definitions for all the columns in the grid? I don’t want to trick C2, I just want to understand what these values are and how subscribers use them.



>Is it good or bad?

Seeing Sharpe Ratio in isolation is bad, however high it is. During backtest I have had systems with Sharpe as high as 10,000 but they are not the ones I would trade. It can be used to break a tie between two systems with the same compounded Annual return or any other performance metric. The one with a higher Sharpe is better.

Realism Factor is no longer used, it was replaced by Autotrade Factor. I pleaded with C2 to also include a volume and limit factor as some stock system vendors exploit thin volumes on stocks and just touched limit orders and make bogus profits, but sadly it was of no use. A subscriber should ask for it, then it would’ve a better chance of being included. Afterall who the heck am I?


Also, a negative Sharpe is bad. youtualfunds.com uses a minimum Sharpe figure of 0.1 for a reason.


Sharp ratio penalize any volatility (up and down volatility) in your results. If your system made 5% a month for 8 of 10 months, but in the other two it makes 20% profits - that hurts your system Sharpe ratio!

So Sharpe ratio of 10 is excellent!

If you look at the Grid, there is a column "Sortino ratio" which is in my opinion much better ratio, as it only penalize down volatility, which can lead to larger draw downs.

> that hurts your system Sharpe ratio!

True, but it is good for your pocket book and why would that be bad. That is why Sharpe Ratio cannot be used as such standalone to compare systems.

Take two extremes for example:

System A returns 0.001% greater than the risk-free interest rate with zero drawdowns, and perfect consistency.

System B returns 100% per year on your account with modest 10% drawdowns.

Which system would you rather trade? System A has a higher Sharpe ratio. It’s actually infinite due to zero standard deviations in returns.

Personally I’ll take system B over A any day! I am more concerned with my equity growth and earning power of my risk capital, than whether periodic returns are exactly the same.

All the Sharpe ratio does is measure consistency. True, that’s one element of merit, but certainly not the whole picture. Using it to determine the merit of a whole trading strategy results in completely erroneous and subjective evaluations, as demonstrated by the extreme example above.

There’s really only one objective way to measure the merit of a system, and that’s how much you expect it to earn for every dollar risked combined with how often it gives you the opportunity to earn that expected return.

The risk concept is important; you’re measuring the return from your risk capital (i.e. your initial stoploss), not what you actually “invest” in the market.


Also, I use a modified Sharpe Ratio (Sharpe + Sortino) for several reasons. That way, we are still measuring consistency, but now recognizing how this consistency is achieved.

Also, it is time that Realism Factor is removed from Grid and replaced by Autotrade Factor as it only serves to confuse users (as it confused the thread initiator). I guess Solaris system owner maintains the Grid. If he is busy or unable to do it, I would volunteer to do it for free.


Hi Edison,

In the mainstream investment industry a Sharpe > 1 is generally considered to be good. 3 or more would be outstanding. Realism Factor is no longer relevant, as Pal explained.

But your system is only a month old so most stats are still pretty meaningless. I give it a year (at the very least 6 months) before I pay any attention to the stats for comparing systems.

Regarding how they are calculated, this is a frequent question. Maybe C2 will publish formulae one day but at the moment we don’t know exactly.