Here is a tool to X-Ray any system & calculate your position size for maximum risk vs. reward ratio. Why a calculator? For the same reason we are using an ordinary calculator: so that we don't have to calculate manually. How does the calculator help us? The first and most important is that we check what the positive expectation of the system is. It’s like using an X-Ray to see what is below the surface. Until now I have never seen a system, accompanied by data that show what the positive expectation for this system is. Instead, they offer you a fog of data according to which the system is brilliant: Trades 252 Profitable 217 (86.1%) Months tracked 15 Profitable months 12 (80.0%) Avg trade duration 6.2 hours Annual return (compounded 121.6% Average wins $462 Average loss $2,008 Profit factor 1.4:1 Max peak-to-valley drawdown (historical 45.52% Correlation w/ S&P 0.044 Sharpe ratio 1.652 Keep after worst-case slippage 95.0% And when you check the system to see its positive expectation using the calculator: For this you need to input only three values – V = percent profitable trades =86.1% W= average wins = $462 L = average loss = $2008 The result is lamentable. PE = …
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