LT/ST conflicting situations

[Timothy Clontz]

The purpose of a model is not only to maximize reward but to optimise the reward to risk ratio. Higher losses could offset that ratio even with slightly improved reward.

[mingpan.lam]

Look like this filter is used to identify the short covering activity by setting a threshold for ATR. Is this filter ATR - average(ATR) ??

[Timothy Clontz]

Hi Timothy,

How do you measure your system's reward to risk ratio when you back test your system? I also focus on profit and max drawn down and I think measuring the reward to risk ratio may be a better choice.

average (Profit/drawdown)

Cheers,

Ellis

Ellis,

I measure average profit over maximum drawdown, rather than average to average. The problem with volatility is the human element -- there's only so much pain I can handle. :-)

Tim

[mingpan.lam]

Ellis,

I measure average profit over maximum drawdown, rather than average to average. The problem with volatility is the human element -- there's only so much pain I can handle. :-)

Tim

Thks Tim.

Very true. Something the backtest result is good but when the drawdown happens, you feel the pain !!