This little picture is a clip from the AmiBroker results produced by the current system. There are a few interesting statistics to observe:
Number of trades: This is the only number NOT in a red box. During the ten year test period - in this case 1/1/1999 to 12/31/2008 - the system took 4487 trades. I like to know that number because it tells me two things. First, that I have plenty of trades to make this statistically significant. And second, it gives me some idea of trade frequency. About 450 trades a year, or about 9 per week is fairly typical.
Long vs. Shorts: Some people ask why my system does well during bear markets. Is it because I employ a lot of short trades? Not really. As you can see, the MultiStage system takes long trades more than 80% of the time. I do take short trades from time to time, but longs tend to perform better in all markets, oddly enough.
Avg. Profit/Loss %: One of the metrics I pay most attention to in system development, is the average return per trade. This statistic takes into account all winners and losers, as well as all longs and shorts. It basically says, that every time I put $100 at risk during the test period, I made $3.33. That's important! It defines and quantifies the edge we have in the market with this system - at least during the test period.
Avg. Bars Held: This is also an interesting number to me, because it gives me some idea of what to expect in the longevity of a trade. The MultiStage system holds trades for about 3 days. I'd say this is pretty typical of a swing trading system, and just perfect for satisfying my short attention span and desire for immediate gratification.
In the next post I will add a few more important metrics that I keep track of, so stay tuned.
Good trading...
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