Whats a realistic Profit Factor?

Discussion in 'Strategy Building' started by ang_99, Mar 20, 2006.

  1. Cant seem to get past 1.2 ish when backtesting intra-day strategies..

    What PF is even worth trading?
  2. I don't trade anything under 1.75. But this really depends...

    For example, I would trade a 1.8, if the system is high frequency. Wouldn't if it's low frequency.

    The weight of the risk is higher on low frequency (like trend-following) so I look for a higher measure.

    But it comes down to:

    1. You use different tools to come to a conclusion.

    2. Conclusion differs based on the type of system.

    3. I would trade anything yet, based solely on your post above.
  3. Star


  4. vikana

    vikana Moderator

    fwiw, my cutoff is pf=1.5 with min 50% win in backtest. If you can't do that, you'll most likely not do well in real time.
  5. The profit factor can go a lot higher in discretionary trading. Automating 1.2-ish might be tough in real life. :(
  6. Math fact: Profit Factor of system "Buy and Hold" is infinity. However, many people do not trade this system. Conclusion: Profit Factor doesn't tell the whole story.
  7. KS96


    1.2 on backtest is a loser.
    You probably need another smarter strategy.

    If I don't get >=3 on backtest without over-optimizing
    (only with rough and robust optimizations),
    I don't even think of trying the system realtime intraday.
    That's for low frequency.

    Which instrument are you backtesting on?
  8. I'm backtesting a variety of large cap stocks. I started learning TS's EL and am starting to get the hang of it. I coded a few ideas/strategies and am realizing that the market is super efficient. It seams next to impossible to find something that is high enough frequency and has a decent enough profit factor (1.8ish) in the long term. Sure I can find stuff that yields decent returns but only trades a few times a year....:mad: But its nice to learn, it puts things into perspective..

  9. you got that right, the dream days of simple techincal trading systems are over, the edge is barely there for simple breakout strategies and the like. system's that are making money today are one's you never heard of and/or are groundbreaking or exploiting a edge only available to the nimble, everything else has been calulated and exploited to the MAX. the market is so well priced and it gets even better priced as time goes by.
    #10     Mar 22, 2006