The best in the EAs

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Hi,

What is the most importat for you if you have a good EA:

Max. drawdown or Profit trades (%) ?

Thanks in advance

 
JoZo:
Hi,

What is the most importat for you if you have a good EA:

Max. drawdown or Profit trades (%) ?

Thanks in advance

The following is my opinion on the importance of the parameters of a trading system:

1. Net Profit - Higher the better

2. Maximum Drawdown - Lower the better

3. Profit Per Trade - Higher the better

4. Time between equity highs - Lower the better

5. Winning Percentage - Higher the better

6. Trading Frequency - Higher the better

Also, a system should be backtested on atleast 200 trades to have some reliability where the results go. This assumes that the backtest data and method is correct. I believe the error percentage is about 7% when you are looking at a sample size of 200 (from Rockwell Trading's website, I got this table

Number of Trades 50 100 200 300 500

Margin of Error 14% 10% 7% 6% 4% )

 

I use this as a criteria when comparing profitability to drawdown...

Let's look at an example:

EA 1: 75% profitable, generating $15,000 USD profit with a 7% drawdown during the month of $7,000 on a $100,000 beginning balance

EA 2: 88% profitable (yippeeee!), generating $22,000 USD profit with a 20% drawdown during the month of $20,000 on a $100,000 beginning balance.

Now...anyone can tell you that 88% is higher than 75%, just as they can tell you that $22,000 is more money than $15,000...but what is your reward-to-risk ratio?

15000 / 7000 = approx 2.14

22000 / 20000 = 1.1

Your reward relative to risk is nearly twice as high with the less profitable EA. Now, if the absolute reward is low enough, I still will want to know what the reward-to-risk ratio is, but maybe I will decide to use the higher-risk EA because I feel that the added performance is worth the risk...but in this case, the return is only 46% higher, while my risk nearly doubles.

I don't know if that answers your question...it's really a matter of individual choice, but this is at least a useful tool to help you decide.

Hope that this helps,

Scott

 
sstillwell:
I use this as a criteria when comparing profitability to drawdown...

Let's look at an example:

EA 1: 75% profitable, generating $15,000 USD profit with a 7% drawdown during the month of $7,000 on a $100,000 beginning balance

EA 2: 88% profitable (yippeeee!), generating $22,000 USD profit with a 20% drawdown during the month of $20,000 on a $100,000 beginning balance.

Now...anyone can tell you that 88% is higher than 75%, just as they can tell you that $22,000 is more money than $15,000...but what is your reward-to-risk ratio?

15000 / 7000 = approx 2.14

22000 / 20000 = 1.1

Your reward relative to risk is nearly twice as high with the less profitable EA. Now, if the absolute reward is low enough, I still will want to know what the reward-to-risk ratio is, but maybe I will decide to use the higher-risk EA because I feel that the added performance is worth the risk...but in this case, the return is only 46% higher, while my risk nearly doubles.

I don't know if that answers your question...it's really a matter of individual choice, but this is at least a useful tool to help you decide.

Hope that this helps,

Scott

Thanks scott you helped me to understadn what I want from an EA.

Thanks again!

 
Maji:
The following is my opinion on the importance of the parameters of a trading system:

1. Net Profit - Higher the better

2. Maximum Drawdown - Lower the better

3. Profit Per Trade - Higher the better

4. Time between equity highs - Lower the better

5. Winning Percentage - Higher the better

6. Trading Frequency - Higher the better

Also, a system should be backtested on atleast 200 trades to have some reliability where the results go. This assumes that the backtest data and method is correct. I believe the error percentage is about 7% when you are looking at a sample size of 200 (from Rockwell Trading's website, I got this table

Number of Trades 50 100 200 300 500

Margin of Error 14% 10% 7% 6% 4% )

Thanks for your opinion. I really appreciate it because I know that you have a good reputation on this forum,you have my respect.

Thanks alot

 

linearity

Linearity in profit is pretty much all I worry about. I don't care how much my profit spikes or any of that. With a linear profit, although it may be sometimes slow, drawdowns are very small, and you can leverage higher without worrying which in turn, makes more money. I have a system i backtested for 2 years(I don't trust backtesting fully but it is a simple system and I know it is somewhat reliable since it is a breakout) and it only makes about average 150-200 pips a month which isnt a lot but drawdowns are very small since it trades about average 2-3 times a week.. but I am forward testing it live now on my money account and even though this month has been slow, I am still positive about 50 pips with only 5 trades. It is still in development to work out kinks but it is relatively new.You can view my trades on my blog I just started.

pipdreams.blogspot.com

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