Factoring in 'Worst Loss' over trading simulations...
Posted: Mon Mar 13, 2017 8:15 am
Hello
When talking about risk management, many people work out their profit factor..... win 300... loss 100 = 3/1.... win 200, lose 100 = 2/1.
What are the thoughts of factoring the worst loss and also position size?
It might looks like this (monte carlo)
=if random <win% + starting capital+ (Starting Capital x % invest) x (avg win / worst loss) -
(Starting capital x % invest) x (avg loss / worst loss)
This was the formula for running a monte carlo over your worst loss -
However, it is interesting as its taking a ratio of the avg win and loss and comparing to the worst loss - versus the traditional avg win / avg loss.
Any math geeks out there care to chime in what their thoughts about this is?
When talking about risk management, many people work out their profit factor..... win 300... loss 100 = 3/1.... win 200, lose 100 = 2/1.
What are the thoughts of factoring the worst loss and also position size?
It might looks like this (monte carlo)
=if random <win% + starting capital+ (Starting Capital x % invest) x (avg win / worst loss) -
(Starting capital x % invest) x (avg loss / worst loss)
This was the formula for running a monte carlo over your worst loss -
However, it is interesting as its taking a ratio of the avg win and loss and comparing to the worst loss - versus the traditional avg win / avg loss.
Any math geeks out there care to chime in what their thoughts about this is?