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Profit Factor - A measure of reward vs. risk. The Profit Factor is the gains generated by winning trades divided by the losses generated by losing trades. A value of 2 would indicate that twice as much money was made from winning trades than was lost from losing trades.
A successful system should have a Profit Factor above 1.5. A Profit Factor above 2 is excellent, and a Profit Factor above 3 is exceptional.
Drawdown-Days per Year - A measure of drawdowns, in terms of severity and duration. Drawdown-days is the total of all drawdowns in the system's statistical history, calculated by
(Total number of drawdowns) x (Average drawdown severity, percent) x (Average drawdown length, days)
This value is then divided by the system's historical length, in years, to obtain the Drawdown-Days per Year.
Systems with a lower value of Drawdown-Days per Year generally have a more stable equity curve, and hit new equity highs with greater regularity.
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