I developed two trading systems. The system A gives around one or two signals per day and is profitable around 70%. The system B gives more than 10 signals per day and is profitable around 60%. Which system do you think is better to trade. Thanks. No flames please.
You must be kidding. Without telling us more details about A and B, your question is worthless. Why must you choose anyway - if you have two good systems, why not trade them both?
2 posts, handle is millionaire asking a loaded question about his system ... SPAM ALERT!!!!!! PEDDLE YOUR WARES ELSEWHERE SNAKEOILER Dog Rennick Chapman outs another one
There is not enough information. Percent of profitable trades is a very poor measure of performance. For example, if you have 66% profitable trades, but the average losing trade is twice bigger than the average winning trade, the system is not making any money. On the other hand, it's not uncommon to have a profitable system which has only 35% of profitable trades. Many trend-following systems have this "low winning percentage" profile. A better measure of performance is Profit Factor, which is gross profit divided by gross loss. An even better measure is Profit Factor divided by standard deviation of itself. Still better yet is Kelly Criterion.
Is there a standard way to calculate the standard deviation of a profit factor? You've got to group the trades as the PF for any individual trade is infinite or 0. I've tried various hacks that work well enough but I was wondering if there was a standard. Also I'm not sure I agree with the metric. PF = 1.05 with .01 standard deviation gets you a score of 105 whereas PF=5 with a standard deviation of 0.50 gets you a score of 10. The PF=5 system is definitely better but that may be an artificial example.