Our goal with this analysis is:. Regardless of general statistics, there are periods in the market where efficiency is high and any trading strategy reduces its edge and increases its losses. That can be caused by events that are impossible to predict. Compared to the Average Annual Return, we see that it can recover from this loses very quickly.
First we have the main ratios that are used by the industry to compare the quality of trading systems. I am putting them here to be able to compare with other systems:.
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First, you can see that the Overall reward to risk ratio is very good. As we saw in the backtest, the average size of winning trades almost doubles the size of losing trades. This is very good as it help to recover from drawdown periods very quickly. That means that a bit more than half of the trades taken end as a lose. This is due to cutting losses very quickly if market goes against us. The Profit factor is the profit generated by profitable trades divided by the losses generated by losing trades. In essence it represent the money made on winning trades compared to the money lost in losing trades.
The higher, the better. You cannot use the Profit factor ratio to compare between different Expert Advisors. On average, RobinVOL 2. Please, note that there will be weeks without trades and weeks with a lot of trades. This is just an average. RobinVOL 2. It has faced winning strikes of up to 12 consecutive months. But it is much more important to focus on losses:.
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It is very important to set the risk level so that this periods do not affect us psychologically thinking too early that the EA does not work and stopping it or lowering the risk just before the recovery period. You will see many times how RobinVOL 2. You have to be confident in that this is the statistically proven optimum behavior. Sometimes this happens, but in the long term, the benefits of letting profits run are much bigger than cutting profits short.
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If you feel excited or worried while trading, you are risking too much. A logarithmic equity curve is not constant in the Y axis, but logarithmic. It has the ability to see the drawdown periods better hiding the effect of money compounding. Looking at the equity curve we can see that there was periods with good slope and periods where the equity increase is more flat. But in general, RobinVOL 2. Remember that this does not mean that it always wins.
It means that in the past we had constant positive years. Looking at the equity curve you see that there are dips and losing periods. In the curve they might be small, but remember that there can be more two consecutive losing months, probably more in the future. No one can predict what will be the market conditions in the future. The only thing we can do is to test our strategy on as much different market conditions as possible.
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The fact that RobinVOL 2. This is the most important section of the analysis in my opinion. The most apparent thing in the graph is that there is a single period of days long that faced a If we go deep and analyze the causes, it was a single losing month followed by a slow recovery in sucesive months. The rest of drawdown periods are less than 5 months, so I would say that it is not common in RobinVOL 2. There is no way to avoid this. This is how RobinVOL 2. If you try to avoid the drawdown periods, you will not be there for the recovery period and you will end up losing money.
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This is very important. All trading strategies in the world are doomed to fail in the future. The most robust strategies might last for many years or even decades. But even strategies with very serious effort in robustness such as RobinVOL 2. We will see later in the Montecarlo Analysis section how to identify this and consequently identify when to stop trading it.
Please, be sure to set the risk of RobinVOL 2. We can see in this graph that the distribution of earnings is stable, specially on the recent years. One thing to note is that obviously, the increase in volatility of the markets in recent years is very good for this strategy. On this chart we can immediately see that the majority of months were winning months, and that winning months were bigger than losing months. You can see that sometimes there are two consecutive losing months and that easily could be three or even four and that losing months are not rare at all.
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Every 4 or 5 months there was a losing month on average. You have to realize that losing months can happen at any time. Even the first month you trade this strategy. And we make money in the future not in the past. Account Options Sign in. Top charts. New releases. Add to Wishlist. BetterTrader makes it easy to stay on top of the financial markets including trading macro economic events no matter where you are. We believe that traders need an edge that can only be gained by statistical analysis. The way we accomplish that is by running statistical models in real-time and helping you to make the right decisions in real-time.
If you want to gain control over you trading, this app is for you.