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Van Tharp's Max Expectancy
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Van Tharp's Max Expectancy

  #21 (permalink)
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rickt View Post
So again, the question comes down to exactly what are we looking for to determine goodness?

We are all doing this to make money. So that must be a criteria - how much money is returned. But because we all invest different amounts, the dollars returned must be a percentage of dollars invested. And because we know that 2% returned over 2 days is better than 2% returned over more than 2 days, we can divide the % dollars returned by the time frame (either minutes or days depending on whether we day trade or not). Taking that a step further, because we all invest over different time frames, we can multiply the result by 365 (for non day traders) or 480 (for day traders) in order to better compare the results.

Rick

Rick, this is why Van's concept of R is so important. If used correctly it normalizes the system to any account size (provided the account is of adequate trading size to begin with).

Here is a cool expectancy tool I found:

Random Equity Curve Simulator of a trading system. Learn it before you trade

G&M

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  #22 (permalink)
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Expectancy and Expectancy Score Optimization Types

I wrote two optimization types (that work in NT 7 quite nicely) based on the information from this thread and Van Tharp's book. Here are the links:

Expectancy Score (which includes expectancy X opportunity), and

Expectancy (which does not include opportunity).

I use the Expectancy optimization all the time and find it gives me great direction when I am optimizing my stategies.

Gordo

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  #23 (permalink)
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Nice work

Mike

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  #24 (permalink)
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I want to understand more about a system ? how do i develop a system for myself ?

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  #25 (permalink)
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I have been doing some serious thinking about expectancy and the routines I wrote. I think my fundamental theory is flawed. The expectancy and expactancy score routines do the math correctly, but they utilize the NT Optimizer to operate. The optimizer (or backtesting if you will) is a serial analysis. That is you start in trade 1 long and follow that trade until you hit profit or you stop out. Then you look for trade 2 which let's say is a short and follow that one along until profit and or stop is reached and so on.

I think the way it SHOULD be done is in parallel. That is, you take every possible trade (long or short) and determine what results you would have achieved with your strategy and then you optimize to that.

I don't believe you can get their with Ninja. So where does that leave us? A different kind of optimizer...[on sale now for only $49.95...but if you act within the next 30 minutes, we will send you not one, but two optimizers...but wait there's more...we also have these amazing ginsue knives that we will give to the first 40 callers...so call now at BR-549!]

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  #26 (permalink)
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Well different optimizers are possible, but extremely complex and based on my last experience a couple years ago they either didn't work with NT7 or worked very poorly.

Look here:
https://futures.io/ninjatrader-programming/3764-mogo-genetic-optimizer-ninjatrader-7-a.html

https://futures.io/ninjatrader-programming/147-ninjatrader-genetic-optimizer.html

Mike

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  #27 (permalink)
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Hi Everyone,

I have read the expectancy's threads, thanks for the optimalization script. My question , is it possible to add custom fields to the backtest result tab (to the summary grid) ? For example if it is possible I would like to edit that tab , and add it an expectancy field.

Thanks,
Szilard

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  #28 (permalink)
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Timot View Post
If you are looking for positive expectancy systems all you have to do is look for positive net profit! No need to calculate the expectancy - it is a total waste of time. By definition, all systems with positive P/L will have positive expectancy. !!!

Maybe said another way is that a "positive expectancy system" should have an equity curve that is smooth and upward sloping.

An older now unavailable product called "The Grail" provided a nice means of quickly being able to see the resultant equity curve for each of the system tests. I personally found this a good means of identifying the systems that were worth evaluating further.

My thought is if would be possible to create an fitness function that identify systems with a strong upwardly sloping equity curve and was very smooth.

Maybe ... <Slope of Linear Reqression of Equity Curve> * <function that calculates "linearness" Equity Curve>

Maybe this is the end result of some of these advanced fitness algorithms ?

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  #29 (permalink)
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In Al Brooks recent webinar on futures.io (formerly BMT):
Webinar: Al Brooks on Probabilities, Timing, Scaling

What he calls "The Traders Equation" is the same as Van Tharp's Expectancy. It's a good webinar.

A more advanced webinar on risk is here, from Ernie Chan on futures.io (formerly BMT):
Webinar: Ernest Chan - Capital Allocation and Risk Management

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

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  #30 (permalink)
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Timot

"More importantly I think after doing some studying that if you want to express the expectancy in terms of multiple R you can only do that when the risk per trade is a fixed amount. This is also obvious. This is also flawed. You will not risk the same with a high beta stock as with a low beta one.

Too much hype in this industry... "



Some people adjust for the beta using ATR as their stop. This allows you to trade consistently over each market type.

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