Lose/Win Percentage for a Good Trading System

JonnyT

Senior member
2,560 22
Hi Matt321,

A 40% win ratio with the average win > than twice the average loss is excellent.

50%+ win ratio's are highly unlikely for any mechanical day trading system. (I have yet to see one)

Unfortunately your statement lacks true substance.

JonnyT
 

frugi

1
1,827 126
A spreadsheet formula for calculating likely max consecutive losers based on number of trades and probability of winning each.

=ROUND(LN(total number of trades)/-LN((1-chance of winning each trade)),0)

where the chance of winning each trade is between 0 and 1.

Possibly useful?
 
  • Like
Reactions: rog1111

Matt321

Member
83 2
Hi Jonny glad you turned up as you seem to know what your talking about from experience,we were
just doing calculation from backtests.In fact I did ask for the average winner and average loser in order
to do an "expectancy test" .I also did say the winner would have to be large.
As I'm looking for a system I have been trying yours out the last couple of days on the £/$ got 46pips yesterday and lost 72 today.Today it went about 5 pips above the range,I then put the bet on. and it reversed back down and in the red all day,still nevermind another day tomorrow.
 

JonnyT

Senior member
2,560 22
What do you mean lost 72?

It lost 35 today as that is the stop loss I specified!

Monday was also a 40 pip+ day...

JonnyT
 

rog1111

Established member
673 10
TheBramble

Your logic seems sound. The number of trades for each system varies from 57 to 280, although I have realised that in some cases results are given for 2004 only. Also, although stops are fixed. not every loser is due to being stopped out on price, as there are time stops too, so some losers could be less than the max. Hmm, this is a new angle for me to consider. Good post !

rog1111

TheBramble said:
I'm using a Monte Carlo generator for the lmost likely max losses calculations.

I'm using the formula GrowlTiger mentioned to calculate the frequency of the max loss string occurring.

If I'm interpreting your data correctly it's saying that the back-tested data falls within the predicted maximum number of consecutive losses.

The variable Pw confuses things a bit, but with the range given (0.40 - 0.54):- (using mcl for max consecutive losses)

Where Pw=0.40 - mcl=12 and occurs every 459 trades.
Where Pw=0.54 - mcl=9 and occurs every 1084 trades.

The fact that the maximum loss string has not yet been reached may be due to the large number of trades required for it to (statistically) manifest itself.

Naturally enough, we have to assume in any randomly initiated test of this nature, the start date of the test can be considered to be slap bang in the middle of the distribution. So if your data was based on trading days (250/year) we could be quite close to the maximum string occurring. In theory....!
 

rog1111

Established member
673 10
Frugi - thanks for posting your formula

I have tried it out, and I must say that it corresponds quite well to my consec losers in 1 year backtesting for all 24 systems (it's actually the same type of system with different time criteria and stops). The correlation is somewhat better than the 20*(1-Pw) formula, but this might be because it takes into account the number of trades ?

rog1111

frugi said:
A spreadsheet formula for calculating likely max consecutive losers based on number of trades and probability of winning each.

=ROUND(LN(total number of trades)/-LN((1-chance of winning each trade)),0)

where the chance of winning each trade is between 0 and 1.

Possibly useful?
 

rog1111

Established member
673 10
matt32

Since the system has 24 different sets of criteria for which backtesting was carried out, there are 24 sets of average winners and losers. The ave winner is larger in all cases, sometimes more than double.

rog1111

Matt321 said:
Hi Jonny glad you turned up as you seem to know what your talking about from experience,we were
just doing calculation from backtests.In fact I did ask for the average winner and average loser in order
to do an "expectancy test" .I also did say the winner would have to be large.
As I'm looking for a system I have been trying yours out the last couple of days on the £/$ got 46pips yesterday and lost 72 today.Today it went about 5 pips above the range,I then put the bet on. and it reversed back down and in the red all day,still nevermind another day tomorrow.
 

TheBramble

Legendary member
8,394 1,170
frugi said:
A spreadsheet formula for calculating likely max consecutive losers based on number of trades and probability of winning each.

=ROUND(LN(total number of trades)/-LN((1-chance of winning each trade)),0)

where the chance of winning each trade is between 0 and 1.

Possibly useful?

I did give that a whirl Frugi, but I found it a bit 'lumpy' in the transitions from one Pw value to another.

Besides, I've got a vested interest in my Monte Carlo Generator (...keep your eyes open for it - very soon (but don't order yet...) on Commercial Trading Systems :rolleyes: )
 

TheBramble

Legendary member
8,394 1,170
rog1111 said:
Also, although stops are fixed. not every loser is due to being stopped out on price, as there are time stops too, so some losers could be less than the max.

It doesn't matter why you stop out or how often you trade/don't trade. Price stops, time stops - doesn't matter. Your system is your system and it has its own Pw derived from precisely the way you trade.

I agree. if your stops are not of a constant size it makes it more difficult to determine absolute (financial) drawdown, but makes no difference to the mcl or their likely distribution.
 

Matt321

Member
83 2
If average Pw = 45% then average win needs to be one and half times averages loss if its double then your laughing on paper anyway.My first statement was that winnings have to be rather bigger than losses.
That is full of substance,don't get so defensive stick to the facts.
 

rog1111

Established member
673 10
Also I could get 9 straight losers, 1 winner, then another long run of losers, so the overall drawdown would be far more devastating than just the initial max consec run of losers. Still, it's useful to know what we could reasonably expect over time - thanks.

rog1111

TheBramble said:
It doesn't matter why you stop out or how often you trade/don't trade. Price stops, time stops - doesn't matter. Your system is your system and it has its own Pw derived from precisely the way you trade.

I agree. if your stops are not of a constant size it makes it more difficult to determine absolute (financial) drawdown, but makes no difference to the mcl or their likely distribution.
 

TheBramble

Legendary member
8,394 1,170
Matt321 said:
If average Pw = 45% then average win needs to be one and half times averages loss if its double then your laughing on paper anyway.My first statement was that winnings have to be rather bigger than losses.
That is full of substance,don't get so defensive stick to the facts.

Matt, who was that aimed at?
 

TheBramble

Legendary member
8,394 1,170
rog1111 said:
Also I could get 9 straight losers, 1 winner, then another long run of losers, so the overall drawdown would be far more devastating than just the initial max consec run of losers.

Absolutely!

You could get an infinite number of consecutive losses - in theory.

I agree that it is an interesting area of exploration - distribution of win/loss.

But ultimately, providing your losses are WAY smaller than your wins, your max risk per trade is minuscule (less than 1% of trading capital) and your system is giving you at least a 50/50 success rate - you'll do OK.
 

Matt321

Member
83 2
Sorry Tony didn't mean to upset you,its good to be all friends together,one 4 all and all 4 one.
I was wondering if the Nationwide housing stats that came out today would affect the £/$ or even the Euro dollar on an intraday basis.
I'm just digging some more great formulas to test your trading systems ,I know I have them jotted down somewhere,you are all great sounding boards for my ideas so stick around.
Rog 1111 I have been trying to download that backtesting system but with no success even though
I put the security setting as low as poss,what 4 christ sake is wrong with it.
Case you wonder where I am,I'll be out jogging,I,m also installing a lot body workout gear as well so I can keep fit while watching the screen,particular in view of the news of GB being the worst country for obesity in the EU,so far I have lost 8lb in 2 weeks.
 

chump

Senior member
2,212 274
"so far I have lost 8lb in 2 weeks"..LOL...what is your stop loss ?

I've been a little inactive through injury lately,but I have a speed ball and punchbag in my gym/office for those special little moments of inaction.... ;)
 
 
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock