DislikedHere's the defnintion of risk/reward from investopedia. Note that as I politely pointed out earlier it is not consistent with your view.
A ratio used by many investors to compare the expected returns of an investment to the amount of risk undertaken to capture these returns. This ratio is calculated mathematically by dividing the amount of profit the trader expects to have made when the position is closed (i.e. the reward) by the amount he or she stands to lose if price moves in the unexpected direction (i.e. the risk).
This definition of the Sterling Ratio is also false. Here is the correct definition of the Sterling Ratio (also from investopeida.com):
A ratio used mainly in the context of hedge funds. This risk-reward measure determines which hedge funds have the highest returns while enduring the least amount of volatility. The formula is as follows:
This formula uses the average for risk (drawdown) and return over the past three years. Drawdown is calculated at the maximum potential loss in the given year.
The Sterling Ratio places emphasis on volatility and not just drawdown. I realize you need us to acknowledge that you are a professional but if you're going to use big words like professionals you should endeavor to know their meaing before using them.Ignored
Sorry phil but this is getting out of hand.
You are getting personal now and trying to pick more and more on details and deviating at such point that is has nothing to do with my initial statement on the 2000 profit and your answer to it that had nothing to do with my statement.
The reason why I use the word sterling ratio is because some people seem to be confused on the term reward/risk ratio. As I explained in posting #18.
The formula for sterling ratio is bellow:
DislikedThis is based on the Sterling ratio developed by Deanne Sterling Jones. It is one solution to resolving the risk-reward equation. Ideally you need 3 years of trading performance to get accurate figures. However the same principles can be applied over a shorter period. The result will tell you if you have been adequately rewarded for the risks you have been taking.
The Sterling ratio compares your average percentage return over 3 consecutive years ( or periods) with your largest realized percentage loss in equity in the same period. The formula then adds 10% to this loss to adjust for the fact that short term calculations of draw down are under stated compared with the annual draw down figure.
There are many ways to calculate sterling ratio nd if you google on "formula for sterling ratio" you will see even some formulas where one would think that they are used to make an atom bomb. Next time if I use the word sterling ratio do I have to post the whole formula ?...
If you want to see how much difference that those 10% would be then do the test.
So yes my friend if you want to hear it ..I did not mension those 10% because it was completely beside the point and the reaction you gave in your posting # 11 on my posting # 9.
Maybe you can say now that my english writting is also not of the best and that there are many errors.
What does that have to do with you refering to me that I ever spoke about a 50% drawdown on any account (wich I never did) and what my clients would say if they face a 1000pip drawdown in january.
Or with the fact that I say it is highly unrealistic to expect making profit every month true trading a system.......
As I apoligized to you for saying you were not serious maybe you can read back over posting 9 and 11 (were it all started with) and say that you misunderstood or miss interpreted my posting.