7 Parameters to measure the success of your Trading System

7 Parameters to measure the success of your Trading System
One of the questions that certainly never comes to mind every forex trader is how to measure the success of a trading system that is used. One of the General estimator is a Win Rate, or how big the Genesis Win trading system than his Loss. However, it is actually less accurate.

To assist you in answering these questions, this article will outline the seven parameters important in measuring the success of a trading system, according to David Jenyns. Jenyns was known as one of the experts in the manufacture of a profitable trading system, had worked in the brokerage firm Ord Minnett top and has written many books on trading systems. Therefore, the seventh parameter of this could be a pretty reliable benchmark.

7 Parameters to measure the success of your Trading System

1. the Win-to-Loss Ratio (Win Rate)

When assessing the performance of a trading system, the first statistics you need to know is the Win-to-Loss Ratio, or Win Rate. Simply put, Win-to-Loss Ratio refers to a comparison between the average Win versus Loss. If this ratio shows You Win more often than the Loss, meaning the trading system had been used in "the right track".

However, do not mistakenly consider this statistic was certainly true with itself, because the Win-to-Loss Ratio not considering how big the Win and how big a Loss. Specific trading system can display a Win-to-Loss Ratio is bad, but it remains profitable. An example is the system of Turtle Trading ratio of his 40:60, but very real benefit.

2. Average Win and Average Loss

In addition to counting the Win-to-Loss Ratio, you need to ensure that the average value of the pips or dollars when Win bigger than average Loss. For example Your backtest consists of 200 times. If 150 trading loss and only 50 win, then obviously a Win-to-Loss Ratio You are 15:75. However, it is not enough to state whether great trading systems or ugly.

For example, Average Win a trading system is $2000, while the Average Loss is $500, then the trading system that remains profitable because (50x2000)-(150x500) = $25.000.

3. Expectancy (Expectations)

Expectations is the most important statistic in measuring the success of a trading system, because meng-quantification-kan system performance with more comprehensive. The formula of its calculations:

(% Of Win x Win Average Size) – (% x Average Loss Loss Size)

For example, if a trading system has a 80% chance to win $100 and 20% chance of Loss $1000, then his expectations:

(80% x $100) – (20% x $1000) or $80 – $200 =-$120

Clearly, that system would impoverishing you.

But a trading system that is exactly the opposite, have likely 20% win $1000 and possibly 80% to $100, then the loss of his expectations far superior:

(20% x $1000) – (80% x $100) or $200 – $80 = + $120

In short, the yield expectations of how the dollar return is expected of every dollar on risk-kan in a trading system. If the system has the expectations of + 120, means you can expect an average return of getting 120 times the capital that you use for trading.

But, of course it's only numbers of samples only. Such, it would be very difficult to reach to hundreds of such expectations. How much expectations to measure the success of a trading system that is realistic? As a rule of thumb, according to Jenyns, if it can reach the $0.60 expectations, means you have been moving in the right direction towards a successful trading system.

4. the Maximum Consecutive Losses (Loss Streak at maximum)

Check out the back of your test results to see how many consecutive Loss experienced by your trading system in conditions of still profit. It is important to note because the statistical data will give You confidence when repeatedly Loss, and can measure the success of a trading system that is used.

For example, when you are facing five or six times the Loss streak. Without knowing how large the maximum consecutive Loss that can be encountered, You may be thinking wrong and no trading system is working well. This is a mistake that many experienced by newcomers. In fact, your trading system could have suffered 10 times the loss, but it remains profitable.

5. Maximum Drawdown (Maximum Drawdown)

Maximum drawdown is the worst period "plunge from the peak" in the performance of your trading system, regardless of how long and how many times experienced Loss trading Loss occurs.

These statistics are usually calculated automatically if you associate the account with the account analysis tools such as ' MyFXbook '. There are no particular benchmark. From the figures that appear, you simply ask yourself, do you feel comfortable with the magnitude of such a Drawdown? If not, then You probably need to tamper with the trading system that has been created.

It is returned to the ratio risk/reward you. In accordance with the motto "High Risk, High Return, generally the greater the risk You are prepared, then the greater the responsibilities also Reward him. However, how big the risk is truly ready to be borne? If a trading system can produce 140% return per year, but his 80% Drawdown, are you ready to face the possibility of losing 80% of the total of your capital when using it?

Most important in choosing a trading system is to use a system that you yourself feel comfortable using it.

6. Number of Trades (how many Trading Positions are opened)

One of the important statistics are rarely discussed is how many trading opportunities generated a system in one period. Trading systems that do not provide proper signals for too rare nor too frequent. The amount should be more or less the same amount of trading that afford you open secraa realistic.

If a trading system giving too much signal, then you will be forced to choose among several signals in one time. It is dangerous because the trading system becomes ambiguous and depends on the trader's subjectivity. On the other hand, if the trading system bring up too little trading opportunities, then you may not get the trading opportunities that exist in the market optimally.

7. The profitability

The last parameter in measuring the success of a trading system, but it may be the most important is profitability or Return on Investment (ROI) within one year.

Profit is the ultimate goal of forex trading for anyone, so this could be said to be the most important parameters. However, in measuring the success of a trading system, needs to be balanced with the six other parameters as well.

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