What are the pros and cons to ranking a system using Van Tharp's Expectancy Method? Thoughts on other methods to rank system quality? Let's see if we can get a discussion in here as this is certainly a useful topic. Thanks much in advance!
I measure the quality of the system / strategies by the amount of money they make. That is the only thing that matters in the end. Ed
I consider how a system might perform under the worst imaginable conditions. I want a system that protects my wealth. This is not testing, but sometimes things happen and losses can appear quickly.
Expectancy (positive value) is a requirement for a system, not a ranking method. Rank your systems by how much they grow your brokerage account. This is the ultimate ranking method. This is an example why the method you mentioned is garbage, plain crap: System 1: Expectancy is $500 per trade. 20 trades per year System 2: Expectancy is $100 per trade. 1000 trades per year Which one do you prefer? You should learn to dinstinguish between theoretical crap by authors who have admited they do not trade and practical truths every seasoned trader knows.
...you need only a few results of your "historical" system test and can do a stress test with a professional MCS software: http://www.elitetrader.com/vb/showthread.php?s=&postid=2578633&highlight=monte+carlo#post2578633 bye, Volker