I have a few questions about the results from system tester in metastock. What does the stuff in the summary with the title "Performance indices" mean, i'm talking about "Buy&Hold Index", "profit/loss index" and "Reward/risk index". Example: Performance Indices Buy & Hold Index 3210.78 % Profit/Loss Index 73.45 % Reward/Risk Index 100.00 %
Performance Indices Buy & Hold Index - This index shows the percentage of the system's profits as compared to a buy and hold strategy's profits. A value of "-50" means that the system's profits were one-half (i.e., 50%) of the buy/hold's. A value of "25" means that the system's profits were 25% greater than the buy/hold's. A value of "0" means they were equal. Ideally you want your system test to produce higher profits than a buy/hold strategy (i.e., Buy/Hold Index is greater than zero); otherwise the trading may not be worth the time and effort. Profit/Loss Index - This index compares the Amount of Winning Trades to the Amount of Losing Trades. The Profit/Loss Index combines Winning Trades and Losing Trades into one value that ranges from -100 (worst) to +100 (best). A negative index value indicates that the trading system produced a net loss. The higher the index value, the higher the Amount of Profitable Trades compared to the Amount of Losing Trades. Index Profit/Loss +100 High Profits/No Losses +50 Profits > Losses 0 Profits = Losses -50 Profits < Losses -100 No Profits/High Losses Reward/Risk Index - This index compares risk to reward. In this index, risk is defined as the System Open Drawdown (i.e., the lowest point of the equity line below the initial investment). Reward is defined as the Total Net Profits (i.e., the final point on the equity line). The Reward/Risk Index combines Reward and Risk into one value that ranges from -100 (riskiest) to +100 (safest). A Reward/Risk Index value of zero means that risk and reward exactly offset each other. Index Reward Risk +100 High None +50 Medium Medium 0 None None -50 Low Medium -100 Very Low High