Won't the average gains and average losses be essential when evaluating the value? If a strategy proves to be correct 90% of the time over 1000 instances, but has an average win of 1 and loss of 5, I'm pretty sure we can put a lot of faith into this system. Even though we don't know with a high confidence that it truly is correct 90% of the time, we can have a better understanding of the expected value because of the win/loss amount.
start with a blueprint,then keel,then ribs.....no guesswork ...do the same with trading..big picture ,then s/r(keel) then several small trades (ribs) to finish your boat(account)...you would never take an axe to the keel when the boat was half built....clarity of mind would stop you..same with trading...smart moves or do nothing
Weeelll that was a sweet comment. Appreciate it. Been spending a few weeks trying to figure out how to trade the SPY without whipsaws. Havn´t got that figured out yet? Driving me nuts. I can´t seem to set down the trading rules, that would eliminate messing around in whipsaws.
Howard Trade the noise? Sort of I guess? You can whip off a $100 net profit couple of times a day. But one loss usually wipes out 5 winners. I think I might be getting a handle on it? Going to bigger time frames and let the ruddy prices gyrate a few hundred dollars up and down. Can only trade 2 spy a week anyway, because of day trader rules, so makes sense.
There is no noise Howard. Unless of course, you can define the term you are using and explain why you think it exists.
Flutter, chatter, noise, whipsaws, I´ve heard it called several things. One of the things is the ability to calculate stop-losses if you use them and still leave enough room for the prices to fluctuate, without getting caught in a trend reversal. Or some other method of stops when you will exit. Myself I use trend lines, or speed lines.
Event driven arbitrage is a much easier example to work with. They don't have statistical confidence on their likelihood of being correct, but their gains and losses outweigh the probabilities. If they know they losses aren't going to be much bigger than there gains, their statistical confidence in the probability of success is worth a lot less.