I try it again, to make it simple:

There are
- number of loosing trades
- number of winning trades
- avarage wins
- avarage losses.

Let's count it for one year.

These gives us in percentage of the portfolie winning.

There are also

- longest number of loosing trades in a row.

Or actually it is better to calculate as the

- maximum of (loosing trades - winning trades) in any given serious of trades.

This gives us the "risk".

There is one more thing, however:

What is the likelyhodd that the risk factor increases or decreeses? Can be counted by avarage and deviation. However, I would say that usually there is not enough data to count this.

Instead better to think it this way:

It is possible that the strategy turned bad. The market has changed. We detect it by noticing that the above maximum exceeds well our back testing. Let say by 20%.

Now, how much money are we willing to loose?

maximum sequence * 1.2 * avarage losses <>

1 comment:

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