Waht PF shoul I aim

Discussion in 'Risk Management' started by amitman, Mar 18, 2008.

  1. amitman


    Hi all,
    I'm currently testing a system (in real time with real money) that has about 1.3/1 Risk/Reward ratio (meaning i risk 13$ for 10$ reward) and at least 70% of success when most days it's over 75%, now the system itself is profitable but i don't feel too comfortable with my R/R ratio . On the other hand maybe my system is reasonable and I don't need to improve it.
    What do you think? Is it a good system or do I need to find a better R/R ratio in order to work less and earn more...\
    thank you
  2. You've got it backwards. You should trade first with real money, THEN develop a system that is compatible with your market temperament. Otherwise, you could end up in a situation where you develop something that you yourself are unable to trade comfortably.
  3. amitman


    did you read my post at all??
    I clearly said I'm testing the system in real time with R-E-A-L money and here you are suggesting me to first trade with real money,
    I mean, really, WTF...
  4. Does it include commision and slippage?

    I would like to see a PF including commisions and slippage of 1.5 or better.

    How many trades? What market and how long is the backtesting for?
  5. axehawk


    Could you first translate WTF the title of this thread says?
  6. Let somebody else trade your system or develop something that's more in tune with your risk tolerance. You may have been putting the cart in front of the horse with what you're doing now.
  7. By PF he probably means profit factor. According to the formula derived by Michael Harris in his website article (http://www.tradingpatterns.com/profitability.pdf):

    PF = WxR/(1-W) where W is the success rate and R the avg win/avg loss ratio.

    In his case, PF = 0.7 x 1.3 /(1 - 0.7) = 3.03

    which is a pretty nice profit factor provided his W and R are stable.

  8. axehawk


    Waht PF shoul I aim

    How about the spelling and grammar of the rest of the sentence?
  9. I didn't even notice :)

  10. bespoke


    What are you uncomfortable about? If you have a 70% win rate, even a 1:1 risk to reward ratio is good. Grow some balls and trade it.

    You're probably uncomfortable because you're unsure of your system. Have you backtested it? How long of a period are you basing these real money numbers on? How many trades so far?
    #10     Mar 19, 2008