What are the odds in any given strategy?

What are the odds in any given strategy? And why is the amount of trades an important factor. Let's say we've a trading strategy with the same stoploss and profit target values. After 20 trades the strategy has a win/loss ratio of 70%. 

So 70% of all the trades were winning trades. This seems fantastic, but is it?

Instead of this strategy, we start coinflipping. Looking at a series of 20 flips might not be sufficient; each flip is independent, so it's quite possible to come up mostly heads or mostly tails. 

20 Coinflips

In other words, 20 good trades says nothing about the edge of a strategy

However, after flipping the coin hundreds or thousands of times, you'll start to notice the data converging on a pattern. If a strategy has more than 100 trades (with same stoploss and profit target values) and a win/loss ratio >50% it might have an edge

100 Coinflips

After 100 coinflips the simulated chance get very close to 0,5, so close to 50% chance of head or tail.

After 500 coinflips (or trades) the simulated chance got even closer to 50%

ProQuant US30 Kulb strategy

Lets take a look at the US30 Kulb strategy

This strategy have a current win/loss ratio of 57% after 221 trades. It has a sufficient amount of trades (coinflips) to be meaningful
Therefor I think that the US30 Kulb strategy has a slight edge in current market

Current US30 Kulb statistics

ProQuant US30 Kulb Strategy

More information about odds: https://blog.wolfram.com/


Saturday, December 05, 2020 knoeioei Weekly P&L 3760
Weekly report - Week 49 ( 1 Dec - 4 Dec '20)

We use cookies on our website. Some of them are essential for the operation of the site, while others help us to improve this site and the user experience (tracking cookies). You can decide for yourself whether you want to allow cookies or not. Please note that if you reject them, you may not be able to use all the functionalities of the site.