Tag Archives: profit factor
The S&P 500 chart with the Profit Factor indicator for a period of 250 days shows the persistent decline in market strength since the beginning of 2014 and how crucial it is for the index to stay above current levels.
Maintaining a constant profit factor while lowering the payoff ratio requires a strategy with higher win rate. In general, high win rate strategies are more difficult to develop but when combined with lower payoff ratio usually perform better during times … Continue reading
In a post yesterday with the title “Gurus Achieve An Astounding 47.4% Accuracy!”, Rick Ferri discusses results about the accuracy of 68 investment gurus in a study by the CXO Advisory Group. Contrary to claims made about the significance of … Continue reading
The problem of trend following is fundamentally simple: choppy markets reduce the effectiveness of trend-following algorithms and shorter trend durations reduce their profitability. There is no need for a more sophisticated analysis. About 15 years ago I derived an equation that describes the problems … Continue reading
A good percentage of traders and investors get ruined because they are deceived into believing that they can be profitable in the longer term even if they are wrong more often than they are right provided they win multiples of what they lose, on … Continue reading
There are many metrics one can use in a search for trading systems. However, just a handful of the metrics are useful and the rest are either derivatives of them or lead to excessive curve-fitting to specific series. Some new metrics that are proposed constantly even collapse … Continue reading