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Van Tharp's SQN with over 100 trades


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Van Tharp's SQN with over 100 trades

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  #21 (permalink)
 kevinkdog   is a Vendor
 
 
Posts: 3,174 since Jul 2012
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Good point @SMCJB !

I always ignored SQN because of the artificial 100 trade max requirement.

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Konradp
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SMCJB View Post
For under 100 trades he says
sqrt(#Trades) * mean / sd
For over 100 trades he says
sqrt(100) * mean / sd
which is
10 * mean /sd
With regards to SQN ask yourself two questions
1) With regards to SQRT(#Trades). Why cap the number of trades at 100. Is a system that does 120 trades no better than 100? Why is a system that does 100 trades only 15% better than one that does 75, but one that does 75 is 22.5% better than one that does 50?
2) With regards to mean /sd, ie the Sharpe Ratio. Modern finance has shown that downside volatility is more of a concern than upside volatility. Itís very easy to illustrate 2 systems where A has a higher Sharpe than B, but everybody would agree B is the better system.
I believe Van Tharpe has since moved on from it.

Sortino ratio might be an answer

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