What do you typically use as the risk free rate of return...the interest rate available in a money market account?
You can leave out the risk free rate in the formula if the point is just to compare systems (see Schwager, A Complete Guide to the Futures Markets). Also, you may want to calculate a stat from the number of trades, the "observed" average P/L and "observed" standard deviation of P/L to see if the "true" average P/L is not zero (see the Encyclopedia of Trading Strategies or Evidence-based Technical Analysis)++
Vince, pretty confused as to what all those numbers mean...can you help explain what I would need to do to calculate it your way? I have also been reading about how these ratios in general are not a good indication for intraday traders that are leveraged a lot more than 100:1. If I make 250k in a year, and have only risked 10k with my prop firm, the annualized rate of return is quite high. I guess as far as comparing two system that doesn't matter.