Indicators trading strategy (ROI, PF, DDMAX)

[Malanno0]

Hi, what do you think are the best indicators to see if a trading strategy is "healthy and profitable"?

ROI, Profit Factor, DDMAX, etc..?

For example in these 2 strategies (same datas) one is more profitable with a higher ROI, but with a "bad" DDMAX and PF and the other one is the opposite. Why should I choose one above the other?

[jimibt]

Hi, what do you think are the best indicators to see if a trading strategy is "healthy and profitable"?

ROI, Profit Factor, DDMAX, etc..?

For example in these 2 strategies (same datas) one is more profitable with a higher ROI, but with a "bad" DDMAX and PF and the other one is the opposite. Why should I choose one above the other?

I would go for the one with the higher PF (right hand on the graphic) and simply scale your stake as a %age of your balance to hopefully achieve a better net profit while keeping DD at the same level.. This is pretty much what I employ in my forex trading. (plus if possible, a look at your sharpe and sortino ratios - trying to edge those up with your PF)

[Malanno0]

Hi, what do you think are the best indicators to see if a trading strategy is "healthy and profitable"?

ROI, Profit Factor, DDMAX, etc..?

For example in these 2 strategies (same datas) one is more profitable with a higher ROI, but with a "bad" DDMAX and PF and the other one is the opposite. Why should I choose one above the other?

I would go for the one with the higher PF (right hand on the graphic) and simply scale your stake as a %age of your balance to hopefully achieve a better net profit while keeping DD at the same level.. This is pretty much what I employ in my forex trading. (plus if possible, a look at your sharpe and sortino ratios - trying to edge those up with your PF)

Thank you, unfortunately I don't know what sharpe and sortino ratios are (I searched on internet, but I didn't understand well lol)

[jimibt]

Hi, what do you think are the best indicators to see if a trading strategy is "healthy and profitable"?

ROI, Profit Factor, DDMAX, etc..?

For example in these 2 strategies (same datas) one is more profitable with a higher ROI, but with a "bad" DDMAX and PF and the other one is the opposite. Why should I choose one above the other?

I would go for the one with the higher PF (right hand on the graphic) and simply scale your stake as a %age of your balance to hopefully achieve a better net profit while keeping DD at the same level.. This is pretty much what I employ in my forex trading. (plus if possible, a look at your sharpe and sortino ratios - trying to edge those up with your PF)

Thank you, unfortunately I don't know what sharpe and sortino ratios are (I searched on internet, but I didn't understand well lol)

i enlisted the help of ChatGpt to try and explain it in relation to sports trading:
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Sports trading is the activity of betting on the outcomes of sporting events, such as football, tennis, cricket, etc. Sharpe and Sortino ratios are useful metrics to evaluate the performance and risk of a sports trading strategy, as they measure the excess return per unit of risk.

The Sharpe ratio uses the standard deviation of the returns as the measure of risk, which means it considers both positive and negative volatility. The Sortino ratio uses the downside deviation of the returns as the measure of risk, which means it only considers the negative volatility that results in losses. Both ratios are calculated by subtracting the risk-free rate of return from the average return of the strategy, and dividing by the respective measure of risk.

To use Sharpe and Sortino ratios to enhance your edge in sports trading, you can do the following:

- Compare different strategies or systems based on their Sharpe and Sortino ratios, and choose the ones that have the highest values, as they indicate higher risk-adjusted returns.
- Optimize your strategy or system parameters by maximizing the Sharpe and Sortino ratios, as they reflect the trade-off between return and risk.
- Monitor your strategy or system performance over time by tracking the Sharpe and Sortino ratios, and identify any changes or deviations that may indicate a deterioration or improvement in your edge.

However, you should also be aware of the limitations and assumptions of Sharpe and Sortino ratios, such as:

- They assume that the returns are normally distributed, which may not be the case for sports trading, as there may be outliers, skewness, or kurtosis in the return distribution.
- They are sensitive to the choice of the risk-free rate of return, which may vary depending on the time horizon, currency, and market conditions of your sports trading.
- They do not account for other aspects of risk, such as liquidity, leverage, drawdowns, or tail events, which may affect your sports trading performance and experience.

Therefore, you should use Sharpe and Sortino ratios as complementary tools, not as the sole criteria, for evaluating and enhancing your edge in sports trading. You should also consider other metrics and factors that are relevant and specific to your sports trading objectives and preferences.

Add to that the use of Kelly Criterion and it gives your 2 contenders a completely different makeup.

[Malanno0]

I would go for the one with the higher PF (right hand on the graphic) and simply scale your stake as a %age of your balance to hopefully achieve a better net profit while keeping DD at the same level.. This is pretty much what I employ in my forex trading. (plus if possible, a look at your sharpe and sortino ratios - trying to edge those up with your PF)

Thank you, unfortunately I don't know what sharpe and sortino ratios are (I searched on internet, but I didn't understand well lol)

i enlisted the help of ChatGpt to try and explain it in relation to sports trading:
--------------------------------------------------------------------------------------------------

Sports trading is the activity of betting on the outcomes of sporting events, such as football, tennis, cricket, etc. Sharpe and Sortino ratios are useful metrics to evaluate the performance and risk of a sports trading strategy, as they measure the excess return per unit of risk.

The Sharpe ratio uses the standard deviation of the returns as the measure of risk, which means it considers both positive and negative volatility. The Sortino ratio uses the downside deviation of the returns as the measure of risk, which means it only considers the negative volatility that results in losses. Both ratios are calculated by subtracting the risk-free rate of return from the average return of the strategy, and dividing by the respective measure of risk.

To use Sharpe and Sortino ratios to enhance your edge in sports trading, you can do the following:

- Compare different strategies or systems based on their Sharpe and Sortino ratios, and choose the ones that have the highest values, as they indicate higher risk-adjusted returns.
- Optimize your strategy or system parameters by maximizing the Sharpe and Sortino ratios, as they reflect the trade-off between return and risk.
- Monitor your strategy or system performance over time by tracking the Sharpe and Sortino ratios, and identify any changes or deviations that may indicate a deterioration or improvement in your edge.

However, you should also be aware of the limitations and assumptions of Sharpe and Sortino ratios, such as:

- They assume that the returns are normally distributed, which may not be the case for sports trading, as there may be outliers, skewness, or kurtosis in the return distribution.
- They are sensitive to the choice of the risk-free rate of return, which may vary depending on the time horizon, currency, and market conditions of your sports trading.
- They do not account for other aspects of risk, such as liquidity, leverage, drawdowns, or tail events, which may affect your sports trading performance and experience.

Therefore, you should use Sharpe and Sortino ratios as complementary tools, not as the sole criteria, for evaluating and enhancing your edge in sports trading. You should also consider other metrics and factors that are relevant and specific to your sports trading objectives and preferences.

Add to that the use of Kelly Criterion and it gives your 2 contenders a completely different makeup.

Thank you again. Overall what's the number one indicator that you think can show the best trading strategy (if there's one)? I think it's PF + DDMAX but I'm not an expert

[jimibt]

Thank you, unfortunately I don't know what sharpe and sortino ratios are (I searched on internet, but I didn't understand well lol)

i enlisted the help of ChatGpt to try and explain it in relation to sports trading:
--------------------------------------------------------------------------------------------------

Sports trading is the activity of betting on the outcomes of sporting events, such as football, tennis, cricket, etc. Sharpe and Sortino ratios are useful metrics to evaluate the performance and risk of a sports trading strategy, as they measure the excess return per unit of risk.

The Sharpe ratio uses the standard deviation of the returns as the measure of risk, which means it considers both positive and negative volatility. The Sortino ratio uses the downside deviation of the returns as the measure of risk, which means it only considers the negative volatility that results in losses. Both ratios are calculated by subtracting the risk-free rate of return from the average return of the strategy, and dividing by the respective measure of risk.

To use Sharpe and Sortino ratios to enhance your edge in sports trading, you can do the following:

- Compare different strategies or systems based on their Sharpe and Sortino ratios, and choose the ones that have the highest values, as they indicate higher risk-adjusted returns.
- Optimize your strategy or system parameters by maximizing the Sharpe and Sortino ratios, as they reflect the trade-off between return and risk.
- Monitor your strategy or system performance over time by tracking the Sharpe and Sortino ratios, and identify any changes or deviations that may indicate a deterioration or improvement in your edge.

However, you should also be aware of the limitations and assumptions of Sharpe and Sortino ratios, such as:

- They assume that the returns are normally distributed, which may not be the case for sports trading, as there may be outliers, skewness, or kurtosis in the return distribution.
- They are sensitive to the choice of the risk-free rate of return, which may vary depending on the time horizon, currency, and market conditions of your sports trading.
- They do not account for other aspects of risk, such as liquidity, leverage, drawdowns, or tail events, which may affect your sports trading performance and experience.

Therefore, you should use Sharpe and Sortino ratios as complementary tools, not as the sole criteria, for evaluating and enhancing your edge in sports trading. You should also consider other metrics and factors that are relevant and specific to your sports trading objectives and preferences.

Add to that the use of Kelly Criterion and it gives your 2 contenders a completely different makeup.

Thank you again. Overall what's the number one indicator that you think can show the best trading strategy (if there's one)? I think it's PF + DDMAX but I'm not an expert

yup -i'd got with min DD and and a fair PF over the opposite... I'd also check my strategy using a variety of staking methods (fixed, %age of bank) etc...