Trading System Performance.
Explanation of the Factors measured in the ‘Performance Summaries.’
Independent organisations that monitor and report on Trading Systems use a number of yardsticks that allow one system to be compared with another, its performance measured and its suitability assessed by the individual . Omega Research Inc has built a system into their Technical Analysis Platforms so that users may themselves determine the Performance of a particular Trading System. It is these Summary Reports which we have included with the Trading System descriptions so that you may see how the programs perform. The terms used in the reports are explained below. We have included individual reports for all the Trading Systems. The parameters used are the same in each report.
At the top of the page:-
Name of the System, The security on which the price bar data is
based, The period over which the calculations are made.
Each System report will give the Performance separately of all
the Long trades ; all the Short trades and Combined for all Trades.
Each Section contains the same measurements so that you may
compare the possible difference between long and short trading of
the system and of other systems.
Total number of trades:-
Is the number of Signals, both Sign of strength and Sign of
Weakness that have occurred in the measured period.
Is the number of winning trades expressed as a percentage of
the total number of trades. Clearly you will look for this to be
as high as possible but it will ideally need to be above 50%
The Ratio of Win/Loss :-
The Average Winning Trade, in equity terms is divided, by
the Average Losing Trade to provide a Ratio. The larger this
Ratio is the better, it ideally needs to be above One. Also
it needs to be greater if the % profitable trades figure is
down near 50% .
Max.’ Consecutive Losers:-
Gives the number of times Losing Trades follow each
other without there being a winning trade. This is important
as if this number starts to get large eg.5 to 6 trades then
unless you have strong faith in the system and are not of a
nervous disposition you will stop trading it. At this time it is
likely that the system then makes substantial returns.
If the other factors are low this needs to be very low, conversely if
other factors are high and the average losses are relatively low then
it may be acceptable that this figure is higher so it is imperative to
look at all the individual trades for the period being viewed.
Max. Draw down:-
This applies principally to futures Traders and is the
largest difference between a high point achieved by
a system in a trade and a subsequent low point from which it
recovered; thus defining the maximum loss Potential. Traders
need to know this figure to determine the minimum funds
required to trade the System.
In an actual long trade where the market rises 8 points from
the point of entry and then falls 4 points but recovers and
rises a further 6 points the Trader would have suffered a
‘Drawdown’ of 4points but ultimately a real gain total of 10
points if he closed out after that last 6 point rise.
There are some Trading Systems available that make excellent returns over a period of time but if the % Profitable number of trades is low, the Ratio average is poor and it has a history of a high number of consecutive losing trades then the average private investor encountering such a system would most likely stop trading it after a run of large losing trades because it did not suit his temperament or style of trading.
By comparison you will see that the figures for our systems are very much at the acceptable end of the spectrum which can be verified by looking in turn at the Summary, then the individual trades and finally the Equity Graph. It can be seen that the % wins are high, the size of wins to losing trades is high, the time in a losing trade is much shorter and consequently the size of losses is smaller
You cannot have discipline without a proven system and, you cannot trade a proven system without discipline.
Please call or e-mail if you have any Queries.
Grail Systems. 020-8940-9244