Custom Tailored System

Discussion in 'Index Futures' started by ElectricSavant, Mar 14, 2003.

  1. dbphoenix


    It doesn't work that way. If your profits wre 146.50 and your losses were 85.75, your profit to loss ratio is 1.7:1. Which may be fine with you, but it's not 3 to 1.

    #21     Mar 30, 2003
  2. Thanks for clearing that up.

    No its not fine with me....the purpose of this thread.

    I was hoping to fine tune.....

    The next 3 systems will include P/L ratio........But I need some help from the community as we go on from here.

    Again, thank you DB for reminding me of this important and common reporting requirement that all systems use. I sometimes forget the conventional you know the Kelly value MM methodolgy does not use P/L ratio but Average Win and Avg loss ratio instead. But that is another story.

    Michael B.
    #22     Mar 30, 2003
  3. dbphoenix


    That may be, but whether you use it or not depends on what you want to know.

    If you had ten winning trades of $1000 each, your "average win" would be $1000. If you had one losing trade of $1000, your "average loss" would also be $1000. That would give you a ratio of 1:1. I assume that that's not what you're looking for.

    #23     Mar 30, 2003
  4. Well...that would depend on the Win Rate...But I have tweaked the Kelly methodolgy which is flawed...but again this is another story....

    Thank you DB...

    Michael B.
    #24     Mar 30, 2003
  5. "Directional System #1 is an Ironman type of trade(buy at open and sell at moc) and merely just calls the direction for that day.

    Avg. W/L Ratio.................................0.72
    POINTS (from 12/3/03 to 3/28/03) 60.75
    # of Trades....................................79

    The trouble with just stating the above results is that there is no allowance for slippage and commissions."

    Electric, that is a great WINRATE, but even as you said, if you're only making .77 points per trade, and have not figured in comms. or slippage, that 70% win to loss ratio wont do you any good.

    there are many systems out there that dont return as much as a 70% win ratio, but are much more profitable since the profit factor (ratio) would be as high as 1.5 - 2.2. look for systems that can diversify you into the same market (ES for example) but look for different criteria to enter and exit trades. also look for ones that have been thoroughly backtested and can show actual results with comms. and slippage indications

    #25     Mar 30, 2003
  6. Thanks traderpete for your kind words and encouragement.

    Michael B.
    #26     Mar 30, 2003
  7. i hope that you werent being sarcastic, what i said was meant to help. unfortunately, many traders think that a particular system is great and will work well due to the stats that are spit out of a spreadsheet, but then when they put it into the real world, it doesnt work. just trying to save you some time and frustration.

    take care...

    #27     Mar 30, 2003
  8. Would anybody belive me if I told them that system 3 had an 80% win rate and a 4.3:1 P/L ratio?

    The problem is that it only traded 15 times in the last 4 calender months with 79 possible trading days. It is a range type of calculation based with first hour price comparisons with an MOC exit.

    Michael B.
    #28     Mar 30, 2003
  9. dbphoenix


    The win rate doesn't have anything to do with profit and loss. This is not to say that it isn't important (you want more wins than losses), but if you let your losses run and you cut your winners short, the win/loss ratio will be misleading.

    As Trader Pete says, a 70% W:L is fine, but you also want a profit to loss ratio of 2 to 1 - more or less - or better. If that's figured incorrectly, then you may wind up rejecting a system that's actually perfectly okay, or pursuing one that's a lost cause.

    #29     Mar 30, 2003
  10. No NO.....I was being genuine not sarcastic....remember I will not get the desired result from this thread by being offensive.

    Also, I battle constantly with my attitude to remain a professional full time trader. So being sarcastic is really not productive. I am please that you took the time to contribute to this thread....and look forward to anyones critique, advice, or praise....but what I really want is some specific advise as to how to tweak or improve one of my 4 systems. But this will require time from someone and this is much to ask or expect.

    Michael B.
    #30     Mar 30, 2003