Which system is better?

Which system is better, 60%winrate/1:1RRR or 40% Winrate/2:1RRR? They should make the same amount right?;-)

 

What ever "system" closely mimics / matches your unique personality

Otherwise you'll be pissin in the wind..., and more importantly fighting yourself


RN

 

SAS(A) == 4*(.6/1 - .4/1)*(.6*1 - .4*1)*((.6*1)/(.4*1)) == 0.24

SAS(B) == 4*(.4/1 - .6/2)*(.4*2 - .6*1)*((.4*2)/(.6*1)) == 0.107

The first system is much better.

 

Good answer Redneck.

Some traders like to win often (even if it's only a little) and cannot stand losing 3, 4 or 5 times in a row.

Others like to win big, even if infrequently.

The rational/logical way of course is to trade the system with the maximum positive expectancy, but that's another story...

 

I have no idea what you just calculated, but my gut tendz to agree. My disc stats looks pretty much like system 1. Even though I hate seeing positions run on without me, the thought of moderate profits turning to a loss has hardwired my brain to not let them get away.

I'm no expert with systems but # 2 appears to have a higher expectancy. Who knows how often each one will take trades, OP didn't specify

 

Woah, where did you get this formula and what's it called? I also figured out that the 60% system is better but by doing it the hardway by doing 100 theoretical trades in excel and comparing the results. I was thinking since the calculated "edge" of both systems is the same but the 60% makes more that it has to do something with compounding and the fact that the 60% has more winning trades?

 

The short answer is just click on either of the "SAS" in the post above, they are links.

The long and tragicomical answer is in the two links below. WARNING: this is akin to watching legislation or sausage being made, two things we are advised to never do. :eek:

System Performance Score

System Achievement Score

 

Ah you came up with the formula yourself nice.;-)

 

Another thing is that I heard that most professional traders would go with the lower win-rate system because it is more "robust". Everything is good in theory, but a real live test would be best.

 

Alternatively, you could run a Monte Carlo analysis in which case you would find the returns are very similar but System B would have a higher drawdown. In my analysis, System A had a Return-DD of 2.38 versus 1.55 for System B. Given almost identical returns, one would chose the system with the lower DD which is System A.