Dear Coders/Traders

I have been testing and coding for a while now and have around 25 systems which I am running live.

Looking through the detailed reports I am wondering what to take from the results to determine the likely success of a particular system.

So for example there seems little point ‘just’ looking at the gain, if the drawdown is big.

I know that you can do a walk forward or a Monte Carlo to really put the strategy through its paces but before considering it for these tests I am trying to decide if it is worth it?

So what are your opinions on using these calculations as a guide???

A)  Gain Vs the drawdown to give a multiplier            (Thinking being that the drawdown is the risk of a strategy which should be weighed against the possible gain)

B)   No. of units that a system is up Vs the worst loss to date      (Thinking being that the Gain is only as good as it’s worst loss multiplied by however many units)

C)   No. of units that a system is up Vs the average loss        (The average loss is more representative and so should be used to calculate how many ‘real’ units the strategy is, in relation to the gain)

D)  The average loss in units Vs the Drawdown                 (To establish the makeup of the drawdown – How many ‘real’ units the strategy was down during the drawdown)

So for example – In the attached picture here would be my calculations for A,B,C,D

A = £1,140 / £107 = 10.6 x multiplier

B = £1,140 / £35 = 32.5 units  (32.5x that the system can have its worst loss before the expected gain is wiped out)

C = £1,140 / £16 = 71 units    (71x being the average amount of losses the system is UP in units)

D = £107 / £16 = 6.5 units    (The most number of units that the system was ever down during its worst drawdown)

Before people critisize this post and say that I should just run a Monte Carlo or Walk forward, it all takes time and to be honest if something has a really good GAIN and a really small drawdown then the system will surely always do well on those extra tests – Especially if it is backed up visually by a smooth and steady equity curve.

Obviously this question is assuming that the results already meet the following minimum requirements:

a) The spread is correct and factored into the backtest

b) The Tick by Tick mode is ticked

c) There is a good number of results over a reasonable time period  ( not 100 trades over 5 years – maybe more like over 100 per year?)

Please let me know your thoughts as to which method you think would be the best or if you know of any other?  I have heard people talk about ‘Sharpe Ratio’ but I’m not sure how to work that out from these results.

Thank you in advance

Mark