You won't like this answer, but the "best" one is probably different for everyone, based on their likes, dislikes, goals and objectives.
For any metric, there are probably a dozen reasons why it is the best, and a dozen reasons why it is NOT the best.
Ultimately, the best metric for you is one that you use to successfully create profitable real time systems. So, you might have to try a few, and wait until the results come in.
Example: For me, I find optimizing for Net Profit works well. Talk to 100 traders, and I bet 95 would say that is crazy. But, for the way I do things, it works (high net profit usually means lower drawdown, and higher number of trades for statistical significance). I know if I use NP for optimizing, and NP/DD later on for evaluation, that translates well into real time performance.
Ideally, I would use the smoothness of the system's equity curve but this is difficult to implement using my platform of choice, NinjaTrader.
I find the next best thing to be the SQN (Van Tharp's System Quality Number) which generally gives higher fitness to results that happen to have decent equity curves (probably because it factors in a system's variance).
Personally I like closed profit / max drawdown on a per-trade and time basis. If this number is higher, it means I'm consistently making more than I risk losing. For example, if I make $500 in a day and my max high-to-low drawdown (including OPEN loss, not closed only) was $100, then I did much better than if I made $600 but had a drawdown of $500. It is risk-adjusted and pretty straightforward.
However, it doesn't tell you how efficient your exit is. Why not incorporate MFE since you are also looking at MAE.
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The following user says Thank You to Big Mike for this post:
Good point -- I actually do track this and my column is titled "efficiency" -- but I do not have an "at a glance" view for this on my primary dashboard, perhaps I will incorporate it. One of the things I dislike about this is that it must be manually entered (which is fine, just a little more inconvenient), as I must use discretion and determine the actual "best exit," not what the software determines the max runup was for the trade.
Tradestation (and probably also MC) refers to this kind of smoothness by means of the PPC (Perfect Profit Correlation), defined as follows: "the correlation of the actual equity curve vs. a "perfect" curve as if the strategy was able to buy every bottom and sell every top. The genetic optimizer will target an equity curve, that closely matches a "perfect" equity curve".
Anyone having experience with this kind of parameter?
The following user says Thank You to Albnd for this post: