System Measurement in a Single Formula

Discussion in 'Risk Management' started by dima777, Aug 12, 2008.

  1. dima777


    I need a single formula which can effectively measure the overall performance of a trading system. Given a ton of varied statistics available in such packages as TradeStation I am left to create my own benchmark. I know one measure which is [(Net Return - Risk Free Return)/Sharpe Ratio of Individual Trade Results]. I wonder what can be any other formulas. I need to incorporate maximum drawdown, average win, average loss, percent profitable, maximum drawdown time and standard deviation of returns for starters.
  2. kut2k2


    Sortino Ratio.
  3. MGJ


    Write a list of the submeasurements you want to include. Next to each item, write down whether Larger Is Better, or Smaller Is Better. For example, next to "Compound Annual Growth Rate In Percent", write "Larger Is Better". Next to "Length of longest drawdown in weeks", write "Smaller Is Better".

    Now calculate your Grand Unified Ratio. The numerator is all of the "Larger Is Better" items, multiplied together. The denominator is all of the "Smaller Is Better items", multiplied together.

    Done. Finis.
  4. Tums


  5. dima777


    sound like a reasonable way to do you think the scale of all submeasurements should be uniform - e.g. only discrete numbers from 1 to 100 or only continuous from 0 to 1?