Tag Archives: win rate

The Market Has Not Seen a Strong Up Day for Longer Than It Has Not Seen a Strong Down Day

It is a fact that the S&P 500 hasn’t had a -2% drop in the last 68 days but it also hasn’t had a 2% rise for 193 days. The market has given bears plenty of room to escape. Share

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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

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The Most Important Performance Measure of Trading Strategies

Shortly after my post on Kelly maximization I received a number of emails from traders who are developing systems but are, understandably so in my opinion, a bit confused about which performance criterion or criteria to use when evaluating them. I understand why those … Continue reading

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Maximizing Kelly is Equivalent to Maximizing Win Rate

My recent post on optimal trading using the Kelly formula has generated a lot of responses, questions and even challenges. A few readers have asked questions that, as they think, hide the key to the “holy grail” of investing and trading. However, as I … Continue reading

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What Every Trader Should Know About the Win Rate, Profit Factor and Payoff Ratio

Every trader should be aware that there is a formula that relates the win rate of a trading system, also known as percent profitability to some old-timers like me, to its profit factor and average win to average loss ratio, also known … Continue reading

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Why trend following is hard – a quantitative answer

In this post I will try to demonstrate with a quantitative analysis why trend following is harder than other trading methods that use much shorter timeframes . I will start with the fundamental statement that a trading system is profitable if the sum of its … Continue reading

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N-Bar Win Rate of Trading Systems

The win rate of a trading system is defined as the ratio of winning trades to total trades. The win rate, denoted here by the letter W,  is an important parameter because along with the ratio of average win to average loss, denoted … Continue reading

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