Registered: Oct 2010
08-22-12 08:42 PM
Quote from Jack_Larkin:
sounds more like curve fitting...
how many years back did you test?
I'd say it was curve fitting if it weren't for the fact that the risk-reward ratio is so skewed toward large risks (and hence large losses), so it's not as if it is some kind of perfect system. Otherwise, I would never expect to see anything with a 90% win rate. There is some optimization as regards to trade selection, but these are very objective. For example, if I get a signal in the opposite direction of a signal that's already in effect, I ignore that second signal because I know from my data that those second signals are more likely to fail to reach the profit target and get stopped out. I don't consider that curve fitting to use that as a filter. So, completely unoptimized, the expectancy is $43/contract per trade and the win rate is in the mid-70% range. I've got about 700 trades in my sample from 3 markets for the past 6 months to a year. I have also worked with this entry method for nearly 3 years now and know from that that there has always been a high win rate for this particular type of trade.
Also, if it were curve-fitting, I wouldn't expect to have an 83% win rate, even on a sample of just 18 trades. If it were truly a coin-flip entry method at its base, the odds of 15 wins in 18 trades would be on the order of less than 0.5%.
It's just a really good entry and profit target selection method. The only problem is that it does rely on these huge win rates because the losses are 3-4X the size of the average winner.