CKWParticipant
Veteran
Hi All,
About Actual Risk reward vs Gain/Loss Ratio (PRT report). In reality, do you assume Gain/Loss Ratio(PRT report) = actual risk reward?
Just my opinion, it’s not.
G/L Ratio = Total Gain/Loss, vary depends on time period and high draw down/ high profit)
my risk reward Ratio = Average(ActualPerf of every single trade/ MaxSL(Points or percentage which defined in code))
some system i am running show G/L 3.68 but i perfer to caculate my own RR which is about 0.442 only.
G/L 3.68 looks perfect but this is a backtest return of 3 years. To me, i prefer to look at 0.442 as my average RR Ratio for every single trade. (It means every single trade w MaxSL 100 points, i should expect average 44.2 points return. Anything more than 44.2 points will be a “bonus” or “temporary profit” to give back market when next few following trades are bad.
How do you make your own risk reward ratio? Welcome to share your view…
br,
CKW
Hi CKW
Two things really, I measure the performance of my backtests using the Gain (i.e. net profit) and dividing it with my Max Drawdown. This gives me a ratio that I use to benchmark my backtests while testing them. The higher the ratio the better (I personally prefer a score above 10).
With regards to actual performance, this is very difficult to determine. I usually take the Avg Gain / Trade amount as on the PRT Report and multiply it with the average amount of trades per day also on the PRT Report. This gives the theoretical average amount gained per day. I then use this value and subtract 30%. But what you can also do is divide your back tested period into three equal parts and use the average between the best performing 1/3rd and worst performing 1/3rd.
Hope that helps.
I took the decision to create Sharpe ratios for all my strategies as it is a standard industry measure of risk v reward although of course there are others. I read some on-line articles and watched a few YouTube videos on the topic and it turned out to be not too difficult to do by exporting the data into Excel and setting up some cell formulas. What Sharpe gives is an objective measure based on a standard deviation of returns against the same returns from low risk asset e.g T-Bills, Gilts, Bank interest rate.
FYI, I know that the backtests results will be expanded with many new ratios and informations. 2D graphs and 3D surface charts should also be added.
@Nicolas do you know when about they plan to release the new PRT version to IG clients? I also sent them quite a few suggestions with regards to the backtest results report that I am really looking forward to. Crazy to think they neglected to include drawdown from the start.
CKWParticipant
Veteran
Just back from vacation 🙂
Thanks @Juanj, @AutoStrategist for your sharing.
@Nicolas, great to hear new release will improve this part and look forward to have more practical features!
br,
CKW
