I was hoping to get some input from you back testers concerning what you think a successful strategy is.
Here is my scenario, would you consider this a successful strategy?
First of all, I prioritize risk/reward over win rate. Therefore, I was able to create some labels in my strategy that show the R value of the trades. In case you don't know, the R value is just your risk reward ratio. My goal is a strategy that gives me 2R, in other words 1:2 risk/reward. It's pretty similar to expectancy.
Anyway, I had about 25 tickers in a scan and they averaged about 2 trades each using my strategy. So, 50 data points would give some reasonable reliability to the statistics. I typically use a max 10% stop loss on my trades. With that, I found that my P/L was a little over $4,000 with an average R value of 1.21. That's using 100 lot sizes on every trade. I then changed my max stop loss to 15% and found my P/L was over $9,000 with an R value of 1.02. A 50% increase in risk to get 100% increase in P/L seems like a good deal.
The problem is, I'm only getting half my R value goal. Granted, a 15% average gain is nothing to shake a stick at. Also, that 1.02R is more of a baseline of purely mechanical trades. Once I actually put eyes on these trades and make decisions on other factors, such as candle reversals or sector analysis, I may not actually take all the trades, or I may sell before I stop out or hold a strong trade longer that the strategy says for more gains. But on the other hand, I may screw up a good systematic trade once I get my hands on it.
So, I guess what I'm asking is, if this were you, would you consider this a successful strategy? It doesn't meet my 2R goal, but a 1.02R baseline seems like a good starting point. Also, what criteria do you guys and girls look for to determine if your strategy is successful when back testing?
Another note, this is for swing trading. I'm looking to be in a trade for days up to a month or so. This is not for day trading.
If anyone is interested in the code for the labels, let me know and I'll add that to this thread later when I am at my other computer.
Thanks!
Here is my scenario, would you consider this a successful strategy?
First of all, I prioritize risk/reward over win rate. Therefore, I was able to create some labels in my strategy that show the R value of the trades. In case you don't know, the R value is just your risk reward ratio. My goal is a strategy that gives me 2R, in other words 1:2 risk/reward. It's pretty similar to expectancy.
Anyway, I had about 25 tickers in a scan and they averaged about 2 trades each using my strategy. So, 50 data points would give some reasonable reliability to the statistics. I typically use a max 10% stop loss on my trades. With that, I found that my P/L was a little over $4,000 with an average R value of 1.21. That's using 100 lot sizes on every trade. I then changed my max stop loss to 15% and found my P/L was over $9,000 with an R value of 1.02. A 50% increase in risk to get 100% increase in P/L seems like a good deal.
The problem is, I'm only getting half my R value goal. Granted, a 15% average gain is nothing to shake a stick at. Also, that 1.02R is more of a baseline of purely mechanical trades. Once I actually put eyes on these trades and make decisions on other factors, such as candle reversals or sector analysis, I may not actually take all the trades, or I may sell before I stop out or hold a strong trade longer that the strategy says for more gains. But on the other hand, I may screw up a good systematic trade once I get my hands on it.
So, I guess what I'm asking is, if this were you, would you consider this a successful strategy? It doesn't meet my 2R goal, but a 1.02R baseline seems like a good starting point. Also, what criteria do you guys and girls look for to determine if your strategy is successful when back testing?
Another note, this is for swing trading. I'm looking to be in a trade for days up to a month or so. This is not for day trading.
If anyone is interested in the code for the labels, let me know and I'll add that to this thread later when I am at my other computer.
Thanks!