Maximising R/R

[nizar]

In the systems Iv tested so far, the R/R i have got are about 4-5 at best.

Now there are systems out there that have R/R at 8-10+.

So my question is, How do you maximise R/R?

Some comments and discussion would be much appreciated.

 

[tech/a]

There is only one way I know of.

Stay in trades longer. Some I have are 12:1 and Ive seen over 20:1 but the bugga wouldnt tell me the secret!

But dont get all tied up on R/R.
R/R is only one way to profit.
More winners than losers another.
Ive seen methods with 2:1 R/R which return spectacular amounts.

Below is a typical screen shot of typical settings for tests.
50% Margin is a sensible margin I use 30-40% on short term methods.
IE 2.5-3:1 leverage.

Pyramid or reinvest profits.

 

[Chorlton]

There is only one way I know of.

Stay in trades longer. Some I have are 12:1 and Ive seen over 20:1 but the bugga wouldnt tell me the secret!

But dont get all tied up on R/R.
R/R is only one way to profit.
More winners than losers another.
Ive seen methods with 2:1 R/R which return spectacular amounts.

Below is a typical screen shot of typical settings for tests.
50% Margin is a sensible margin I use 30-40% on short term methods.
IE 2.5-3:1 leverage.

Pyramid or reinvest profits.

With regard to level of importance when system developing, would I be right in saying that trying to achieve an improved R:R would be the preferred choice rather than attempting to find more winners? ... Given the fact that Brokerage/Trading costs would increase for the latter.

Obviously, once the first option had been exhausted then it would make sense to try to increase the win rate.

Tech/A, Given your experience on this subject, in your opinion would someone new to system development be better off concentrating on different Long-Term strategies until a favourable R:R could be returned rather than focusing on shorter term strategies which could potentially return more winners??

The reason I ask is that I read somewhere that it is easier to make a consistant profit trading a longer-term system.

Just interested in your views.....

Thanks...

 

[tech/a]

With regard to level of importance when system developing, would I be right in saying that trying to achieve an improved R:R would be the preferred choice rather than attempting to find more winners? ... Given the fact that Brokerage/Trading costs would increase for the latter.

An amazingly diverse topic.I'll attempt to be brief in my opinion which may well be at variance with some others.

(1) History has shown that in the longterm stock markets tend to have very long periods of bullishness.The only way to increase R:R that I know of is to increase the time in stocks that have tremendous and sustained bullruns.There will be periods of flat and drawdown.But LONGTERM very solid returns can be gained.Improvements can be added including but not limited to.
(1) Time stops.
(2) Leverage during sustained bullishness
(3) Pyramiding profits and culling non performers.

(2) Short term trading should be designed to flatten your equity curve.
Longterm systems will have quite erratic equity curves given the time of holding stocks.
Short term should see more of a consistency given the frequency of trading and the general consistency in R:R.

As an indication.
Most longterm systems have a win rate of 30-40% and R:R of 6 or better.
Most short term systems have a greater than 50% win rate and R/R generally less than 6.
A combination of the 2 is of course preferable.
I'm seriously of the opinion that one should have a number of systems operating at the onetime.On size fits all isnt the ideal.
Investment should be heavier in the out performing system/s at various times and this can be gauged by equity graphs and composite portfolio charts (which is another topic---where you can compare relative strength of methods and portfolios against all sorts of things including themselves!).

Obviously, once the first option had been exhausted then it would make sense to try to increase the win rate.

I believe its a combination partially answered in having different systems all operative.Radge has 4 that I know of going,his thinking---well I dont know.

Tech/A, Given your experience on this subject, in your opinion would someone new to system development be better off concentrating on different Long-Term strategies until a favourable R:R could be returned rather than focusing on shorter term strategies which could potentially return more winners??

Developing longer term methods are much much easier than shorter term which has been evidenced in about 3 attempts I have seen here and on the old Reefcap get pretty well no where.
But you'd be pretty game trading a longterm method from its beginning in a market which is less than ideal---like now.
Most of your testing would be over one of the most bullish periods seen!.

I think most complicate systems particularly short term.
I'd go further and say that selecting futures or an index or a smaller portfolio for shorter term trading methodologies would give better results.
It doesnt have to be clever only profitable. Techtrader is as basic as it gets!

The reason I ask is that I read somewhere that it is easier to make a consistant profit trading a longer-term system.

Consistent and given a long enough period/coupled with minimal trading experience and Id agree.
Put in the time become expert in the areas that MATTER
As Radge says---why a system works and then I wouldnt agree.

Unfortunately everyone needs to spend the time to advance.
Trust me after 14 yrs I'm still on the road---but hey its bloody interesting!

Just interested in your views.....

Thanks...

And there you have it!
Well the condensed version.

 

[Chorlton]

Tech/A,

As always, thanks for taking the time to post your comments.... Very interesting....

Cheers,

Chorlton

 

[nizar]

Tech, if that wasnt one of the best posts on this forum, then i dont know what is.

Thanks for your contribution.