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Tag Archives: profit factor
Strategies With High Win Rate And Lower Payoff Ratio
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
S&P 500: Shortterm Correction Is Near
The S&P 500 index rose to alltime highs but performance remains weak. It is possible that this was the outcome of a positive drift in random price action and a shortterm reversion to the mean is near. Share
Posted in Technical Analysis
Tagged profit factor
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Statistics and Lessons From the Last Three S&P 500 Uptrends
The coin is biased towards heads. The statistics indicate that the last three uptrends in S&P 500 were the result of a small structural bias in the order of +6%. This bias may continue in the absence of adverse developments. Share
Posted in Market Statistics
Tagged expectation, market bias, payoff ratio, profit factor
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On Investment Guru Accuracy
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
Posted in Market Statistics
Tagged coin toss, guru accurancy, profit factor, random variables
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Is There Any Future in Equity Index TrendFollowing?
The problem of trend following is fundamentally simple: choppy markets reduce the effectiveness of trendfollowing 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
Posted in Trading System Analysis, Trend following
Tagged autocorrelation, HFT, payoff ratio, profit factor, profitability rule, trend following
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Risk of Ruin For Dummies
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
Posted in Risk Management
Tagged profit factor, risk of ruin, win rate
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New Metrics that Make Sense are Rare
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 curvefitting to specific series. Some new metrics that are proposed constantly even collapse … Continue reading
Posted in Trading System Design
Tagged Metric, profit factor
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