I first read about the edge ratio in the Book Way of The Turtle. The edge that the trading system's entry provides is measured using this method by measuring how the price behaves over a certain period of time, starting from the moment the trade is taken until a fixed point in time in the future.

Basically, when the entry criteria is met the number of pips the market moves in favour of the trade is divided by the number of pips the market moves against the trade from the moment the trade is entered until the fixed point in time in the future. It is this number that gives the entry's edge ratio.

If found that 80-day Donchian channels produced an edge ratio of about 1.40 to 1 over 20 days and that this produced a system that had a ratio of around 2.10 to 1 when it came to the system's pips won to pips lost ratio. This was improved to 2.29 to 1 when used with an exit that also had an edge.

The full results are here http://www.myforexdot.org.uk/Measuri...stemsEdge.html

So what is you trading system's edge and how do you quantify it?

Basically, when the entry criteria is met the number of pips the market moves in favour of the trade is divided by the number of pips the market moves against the trade from the moment the trade is entered until the fixed point in time in the future. It is this number that gives the entry's edge ratio.

If found that 80-day Donchian channels produced an edge ratio of about 1.40 to 1 over 20 days and that this produced a system that had a ratio of around 2.10 to 1 when it came to the system's pips won to pips lost ratio. This was improved to 2.29 to 1 when used with an exit that also had an edge.

The full results are here http://www.myforexdot.org.uk/Measuri...stemsEdge.html

So what is you trading system's edge and how do you quantify it?