Only for system traders. Which factor of your system enable you to make profits? Can it give you better reward/risk ratio? So you can make profit even there are more lossing trades. Can it give you more wining trades than lossing trades? Which one is easier to achieve? My system just gives me more winning trades. The reward/risk ratio is just 1:1 (sometimes less)!
how bout I:0, that's infinity to zero. A trade that never moves against you by even one tick is something to be savored and enjoyed. Those are the ones you don't want to be cutting short at 1 pt. profit. That damn r to r formula has screwed up more traders. Hit rate is a hobby. The IRS won't let you declare it a business. Think about that bell curve. If it moves against you quickly, it can come back quickly. Slow death is almost certain death. That damn r/r has screwed up more traders. You can make a lot of money getting in on a trade when everybody else is too busy working on r and r. Looking for a hobby for fun and profit? I enjoy making high hit rates. It's just something to do when you have your r/r already in good hands. Oh sorry, didn't see the system only sign. I've got one I'm working on. All it takes is a deck of cards.... Man, I sure get smart when all I do is paper trade for the day. No wonder all the paper traders around here know everything.
I'm not a system trader, but I think I speak for them when I say that the part of the system that allows them to make profits is the part of the system that tends to be right the majority of them time. It's also the part of the system that tells them they're wrong when they start to lose money.
It's not so much any single factor in the system so much as the discipline to follow the system that is the key factor. There are times that I'm 90% sure that the signal is a loser, I still take the signal. The problem with not taking a signal is that you end up missing the best trades. These are the signals that scare you the most or that you are so sure that there is no way it can be a winner (along with everyone else) that the market ends up exploding in the direction of the signal. If you are not on board it just keeps running without any kind of pullback.
Once you've satisfied yourself that it's a winning system, that is. If you can't trust your work, you're going to be second-guessing it all the time. May as well not have one at all. --Db
There are 2 points to risk /reward # of times you are right and # the ratio of your ave winning profits to losing profits Robert
I think interesting answers are here : http://www.elitetrader.com/tr/index.cfm?s=17&t=74 and in the strategy forum, obviously. there is no one more important factors. or more precisely, it depends on the strategy type, the time frame. depending on these, the important factor is different. I think it's interesting to watch closely your drawdown and therefore the shape of your equity curve. all things being equal, that's the most important data to look at. not performance, not win ratio, not average win. it's the composite of all this that is important : the equity curve. a volatile equity curve, a sideways equity curve are usually bad signs. I like to think that past performance does not predict future performance (as the saying goes) but I want the best looking past performance. that's the best way to have the edge and odds in your favor. said otherwise, bad past performance is seldom yielding good future performance ! tntneo