What are your favorite trading system statistics or the traidng system statistics you believe are most indicative of a system's potential to be profitable/succesful, win/loss, gross profit, etc? I have also heard of a trading statistics referred to as "edge" and "impact ratio". What are the mathematical defintions for these statistics? Thx
I'm very happy if a system shows about 50% wins and a Win / Loss ratio of 1.6 or better in walk forward testing. DS
Edge: (from backtesting your system) #trades - (#system parameters) >= 30; #wins*(avg win) - #losses*|avg loss| > Buy&Hold.
I've also seen "edge" defined as (Avg Win/Avg Loss) * (%win/%Loss) Anyone familiar with this? Any more comments?
I like to see (% of profitable months) > 70% and (% of profitable years) > 85%. I also like to run Monte Carlo Analysis to create 5,000 new equity curves by scrambling and resampling the daily returns of the backtested equity curve. Then I like to plot the cumulative probability distribution of the duration of longest drawdown (for each of the 5,000 new equity curves). I like to see (Probability of a drawdown longer than 9 months) < 50%.