As a new person to the forum I feel that there is a need for a common set of criteria for people to quote when sharing and comparing perfromance information about trading systems. Just looking down the current threads there are references made to many systems with all sorts of claims but no real way of comparing their performance. My feeling is that all figures should be quoted on at least 4 years of data as you run the risk of not being exposed to the majority of possible mkt conditions and also run the risk of optimising against a short lived mkt phenomena. I feel publishers should always quote the amount of data when presenting results.
I thought I would list some of the common criteria I know of as a starting point :
a) average annualised percentage return
b) average pips per trade profit after spread (needs sufficient breathing space to cover likely slippage - very easy to get duped by this). If real trading slippage is known factor this in to average pips per trade and quote this when publishing results
c) maximum drawdown - largest percentage fall experienced across dataset. Critical for determining appropriate leveraging/gearing ratio.
d) profit/loss ratio = (sum of all winning trades)/abs(sum of all losing trades) - measures general reliability of system. (systems that make all their money on a few good trades are questionable and difficult to trade psychologically)
e) Sharpe ratio - measures consistency of returns (try googling it if you are not sure of this one).
Thoughts ?
I thought I would list some of the common criteria I know of as a starting point :
a) average annualised percentage return
b) average pips per trade profit after spread (needs sufficient breathing space to cover likely slippage - very easy to get duped by this). If real trading slippage is known factor this in to average pips per trade and quote this when publishing results
c) maximum drawdown - largest percentage fall experienced across dataset. Critical for determining appropriate leveraging/gearing ratio.
d) profit/loss ratio = (sum of all winning trades)/abs(sum of all losing trades) - measures general reliability of system. (systems that make all their money on a few good trades are questionable and difficult to trade psychologically)
e) Sharpe ratio - measures consistency of returns (try googling it if you are not sure of this one).
Thoughts ?