Which is easier - a steady 500 pips a month or just 20? - page 5
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OK, we are having a substantive conversation. The number of task parameters is starting to grow.
I understand the term "stability" approximately as follows: if you take the last year of trading and average profitability (not in pips, but in % of balance at the beginning of each month, and not arithmetically, but geometrically), it should be at least 102% in 95% of cases. Example:
98%, 106%, 97%, 112%, 102%, 100%, 93%, 107%, 92%, 109%, 111%, 97%. The product of these numbers is 1.237 * 10^24. The 12th degree root is 101.79, i.e. 1.79% per month. Something close to the target.
As we can see, in reality we sometimes had to reach 12% per month, i.e. much higher figures than the claimed 2%.
The question arises: at what numbers do we need to stop, both up and down? We can first consider the simplest MM, geometric, i.e. constant lot per given capital (say 0.1/$1K).
If you want to estimate the trading system you have to choose a fixed lot and fix the capital. If you do not do that, you can maturely argue that the system that gives 50% profit to the capital per month is better than the one that gave only 5%, and there will be an argument about nothing (the first got a profit of 50% in one transaction by entering all the capital, and the other 5% by performing 1000 transactions, risking 0.000001% of capital).
If you want to compare two systems you have to do it all in pips, plus one of the parameters.
An example of comparing two systems.
1. Profit 50 points drawdown 50 points.
2. My profit is 20 points, the drawdown is 20 points.
There is no comparison possible. You cannot choose the best system unambiguously. You have to equate one parameter.
1. Profit 50 drawdown 20 points.
2. Profit 20 drawdown 20.
After such procedure the choice is obvious, the first system is better.
2Prival
One abstract characteristic and can't say anything, especially in isolation from the most important criteria on which the equity curve depends.
By the way, I recommend answering the questions rather than jumping to "personalities".
2Mathemat.
Stability (as I understand it) is a characteristic of a system reflecting its resilience to the dynamic conditions in which the system exists. I.e. if a trading system produces a profit (even if with high dispersion and in some months it shows a minus) during a long period of time, which we can "model" in the future, analyzing the possible influence of dynamic factors on the system, such a system may be called stable. As in probability theory when they say "with an infinite number of trials...".
Where do the numbers "then it must be at least 102% 95% of the time" come from?
If you do not do this, then you can mouth off and argue that a system that gives 50% profit per month is better than one that only gives 5%, and there is nothing to argue about. If you do not do that, you may maturely argue that the system that gives 50% profit to the capital per month is better than the one that gave only 5% and there will be no argument.
If you want to compare two systems, you need to do it all in points, plus equate one of the parameters.
For example we compare two systems.
1. Profit 50 pips drawdown 50 pips.
2. My profit is 20 points, the drawdown is 20 points.
There is no comparison possible. You cannot choose the best system unambiguously. You have to equate one parameter.
1. Profit 50 drawdown 20 points.
2. Profit 20 drawdown 20.
After this procedure the choice is obvious, the first system is better.
We are not talking about a single "test", but about a series of deals, where the "conditions" for opening the next ones depend on the results of each one. To reason virtually means to generate empty abstractions. It is onanism.
Where did the figure "it must be at least 102% in 95% of cases" come from?
102% is the result of one successful trade with Tp=SL=20 0.1 lot with a balance of 1000 quid. Pips are counted the old way, i.e. four digits.
We are not talking about a single "test", but about a series of deals, where the "conditions" for opening the next ones depend on the results of each one. To reason virtually means to generate empty abstractions. It is masturbation.
I don't care if it's a million trades, as long as the drawdown in pips = 0.
Once again, for those who are in the tank. You opened a deal and the price did not move down to zero points from the entry point. The virtual stop closed at zero or made a profit. Describe a system that is better than this ?
And where did the 20 pips value come from?
20 pips is a 2% increase in initial capital per month for a 0.1 lot position per 1000 quid of capital. That's the way I want it, and I don't need any more. And that's how I want to do it every month on average.
2 Prival: It's a perfect system. It's the best, neither for you nor for me. The only problem is learning how to generate such signals.
I don't care if it's a million trades, as long as the drawdown in pips = 0.
Once again, for those in the tank. You opened a trade and the price did not go down from the entry point. The virtual stop closed at zero or made a profit. Describe a system that is better than this ?
A better system is one that exists. I don't like theorising. Besides, after opening a position we already have a drawdown on the spread.
20 pips is a 2% increase in initial capital per month for a 0.1 lot position per 1000 quid of capital. That's the way I want it, and I don't need any more. And that's how I want it to be every month on average.
2 Prival: It's a perfect system. It's definitely not better - not for you or me. The only problem is to learn how to generate such signals.
Here, the amount of capital is there after all... And what is the risk rate of interest? In percentages, please.
...
2 Prival: The perfect system. There's certainly no better one - neither you nor I. The only problem is learning how to generate such signals.
Oh, thank God, finally. Alexei now, on that basis. Profit is not important. It is the loss that matters. It is better when it (the possible loss) is equal to zero. I think it's clear why I am rubbing developers for ticks. It is possible only when analyzing the tick-flow. To close at zero.
And practically it is also possible, if you look at the history, during any day on the tick history you will find the entry points, that will give you 20 points of profit with no drawdown, and they are many, even very many.
But if you work on a minute-by-minute basis, it's not possible.