How is the expected payoff calculated? - page 4
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I'll go next door and they say they're giving away 25 pips a day for free, for some reason not dollars.
It's not clear which way "from 25 pips" goes, by the way.
In pips - you need it as a trader to understand how much your average deal differs from the spread.
Most systems in testing show losses around the spread per trade. This is the expectation of almost any "typical plum" system, "minus the spread".
If you need a profitable system, then your average trade should be significantly positive, i.e. at least compensate for this "minus spread" with some margin. It is considered that if a system's expected payoff is not less than 1-2 spreads, it may be considered as profitable.
Now, after the variable spread has been implemented in most brokerage companies, the situation is more complicated: you should have an idea about the average spread at opening your trades. And try to ensure that the expectation of the system is at least larger than this average spread, better several times larger.
Thank you for your answer, but it's a little unclear to me. I just recently started doing technical analysis. I look through my history manually without a tester, i.e. I look through the chart and write out trades. I understand the expected payoff. What does "deal spread" mean?
Or for example this sentence - "This is the expectation of almost any "typical plum" system, "minus the spread". When I look at the history, I take into account the spread of a particular currency pair. Or is that not what we're talking about here.
What is the average spread?
Explain or throw in a link if possible.
Sincerely
By spread per trade. It means that if there are many deals, then expectation of one deal of a typical system is approximately equal to -spread (in points), i.e., equal to commission.
Or for example this sentence - "This is the expectation of almost any "typical plum" system, "minus the spread". When I look at the history, I take into account the spread of a particular currency pair. Or is that not what we're talking about here.
Exactly about expected payoff, or rather its estimation.
What is the average spread?
Explain or throw in a link if possible.
Average spread is an average spread, i.e. it is an arithmetic mean of all spreads of a pair for a long enough time of observation.
By spread per trade. It means that if there are many deals, then expectation of one deal of a typical system is approximately equal to -spread (in points), i.e., it is equal to a commission.
Exactly about expected payoff, or rather its estimation.
Average spread is an average spread, i.e. it is an arithmetic mean of all spreads of a pair for a long enough time of observation.
We have 30 deals, profit in points on these deals is 50 points, spread of this pair for the observed period is equal to 4 points. 50/30 = 1.7. Further I should subtract the spread from the received expected payoff. 1,7-4 = -2,3. And I have a complete loss in the theoretical perspective? In the best case I need expectation in this example to be not less than 6?
"Ofweli & Co Offshore Mutual Fund" - Our MO is $100 per transaction.
Better?
I'll go, they say they're giving away 25 pips a day for free, somehow not dollars.
Of course 25 pips a day is much better!!! 10 lots and we are $2,500 in profit
what do we need your 100 quid for? 2,500 as in more...
And anyway... so many minds have gathered in this thread... there's even a disagreement over the elementary question: "What is the MoD???"
I didn't think this thread would grow to 4 pages ))))
And anyway... such minds have gathered in this thread... that there is even disagreement on the elementary question: "What is the MoD???"
Don't be so obvious, please. No one is discussing what expectation is. The question is how to measure it. I would offer it in ounces, but I am afraid Gaddafi will suffer the same fate.
It remains in pips or percentages.
It's as simple as that. Your total profit on 30 trades equals 50 pips. 1.7 is right, you don't need to take away the spread. But it would be nice to compare it with spread. The spread is significantly less than yours (1.7 is less than 4). It's coming out too liquid, the margin is too small. Or you might want to check it on a longer timeframe and see if your results are better.
It would be better if the expected payoff were no less than 4, and better yet, no less than 8 points (double spread).
P.S. I will not bring up the issue that 1.7 is not a mathematical expectation, but only its estimate, and it is rather crude.
In general, the mathematical expectation is unknown, but its estimate is known, which converges to Mo for an infinite number of trials and for stationary series. For real ones there may be no Mo at all. Therefore average profit per transaction is more correct. imha
P.S. While writing, Alexey already noted it in postscript. In general, whatever you call it, as long as it was useful
We set TP-50, SL -50. If the number of profitable orders is equal to the unprofitable ones, we obtain 0. If one order is larger - 50, one smaller -50.
What are your TP and SL values?