For those who don't know me, I feel my trading style is rather unique.
I trade with 37 different systems, 34 of those systems are with EAs, and 32 of those EAs can be found for free here on ForexFactory. I will not list the EAs here, I will purposely make it difficult--but not impossible--to recreate exactly how I trade.
Given my nature to release free EAs for various systems here on ForexFactory, I receive scores of requests from people to look at their systems (Read: They want a free EA). I generally try to entertain every possibility, and as I move through these requests, I have further improved my methods of evaluating systems in a fairly simple formula. I call it my Success Score.
Success Score
(Average Win) / (Average Loss) * (Percent Win) * 100 = Success Score
System 1
Let's say a system wins on average 10 pips, and loses on average 5 pips, and has a 60% chance of winning.
(10) / (5) * (0.60) * 100 = 120
This system has a success score of 120, and I would probably code an EA for that system.
System 2
Let's say a system wins on average $100, and loses on average $500, and has a 99% chance of winning.
(100) / (500) * (0.99) * 100 = 19.8.
That system has a success score of 19.8, and I would definitely not code an EA for that system.
[Edit] The addition of another metric changes my decision on this from 'would definitely not' to 'probably will'. The breakeven rate of this system is 83.3%.
Most systems I code have a success score of 70 or higher. There are obviously some exceptions: New entry method, win rate is higher than breakeven rate, unique exit strategy, 100% win rate, or something which I haven't seen before.
A note: Average Win and Average Loss can be whatever you choose. Just make sure they are the same units (pips or dollars)
Another metric I use to measure a system is something I call the Breakeven Rate.
Breakeven Rate
Simply put, how many losses does it take to offset a win or how many wins does it take to offset a loss?
System 1
Let's say a system wins on average 20 pips, and loses on average 20 pips. That means that this system has a breakeven rate of 50%. I would need 50% of those trades to win just to break even.
System 2
Let's say a system wins on average $10 and loses on average $100. It would take 10 wins to offset one loss. so the breakeven rate is 10/11 or 90.9%. I would need 90.9% of those trades to win just to break even.
System 3
Let's say a system wins on average 50 pips and loses on average 25 pips. It takes 0.5 wins to offset a loss, or a breakeven rate of 33.3%. I would need 33.3% of those trades to win just to break even.
If you have a response to me regarding how I do things, please PM me. I would appreciate it if there were no replies to this thread.
I trade with 37 different systems, 34 of those systems are with EAs, and 32 of those EAs can be found for free here on ForexFactory. I will not list the EAs here, I will purposely make it difficult--but not impossible--to recreate exactly how I trade.
Given my nature to release free EAs for various systems here on ForexFactory, I receive scores of requests from people to look at their systems (Read: They want a free EA). I generally try to entertain every possibility, and as I move through these requests, I have further improved my methods of evaluating systems in a fairly simple formula. I call it my Success Score.
Success Score
(Average Win) / (Average Loss) * (Percent Win) * 100 = Success Score
System 1
Let's say a system wins on average 10 pips, and loses on average 5 pips, and has a 60% chance of winning.
(10) / (5) * (0.60) * 100 = 120
This system has a success score of 120, and I would probably code an EA for that system.
System 2
Let's say a system wins on average $100, and loses on average $500, and has a 99% chance of winning.
(100) / (500) * (0.99) * 100 = 19.8.
That system has a success score of 19.8, and I would definitely not code an EA for that system.
[Edit] The addition of another metric changes my decision on this from 'would definitely not' to 'probably will'. The breakeven rate of this system is 83.3%.
Most systems I code have a success score of 70 or higher. There are obviously some exceptions: New entry method, win rate is higher than breakeven rate, unique exit strategy, 100% win rate, or something which I haven't seen before.
A note: Average Win and Average Loss can be whatever you choose. Just make sure they are the same units (pips or dollars)
Another metric I use to measure a system is something I call the Breakeven Rate.
Breakeven Rate
Simply put, how many losses does it take to offset a win or how many wins does it take to offset a loss?
System 1
Let's say a system wins on average 20 pips, and loses on average 20 pips. That means that this system has a breakeven rate of 50%. I would need 50% of those trades to win just to break even.
System 2
Let's say a system wins on average $10 and loses on average $100. It would take 10 wins to offset one loss. so the breakeven rate is 10/11 or 90.9%. I would need 90.9% of those trades to win just to break even.
System 3
Let's say a system wins on average 50 pips and loses on average 25 pips. It takes 0.5 wins to offset a loss, or a breakeven rate of 33.3%. I would need 33.3% of those trades to win just to break even.
If you have a response to me regarding how I do things, please PM me. I would appreciate it if there were no replies to this thread.