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Hello dear friends.
There has been a long discussion about the criteria, which a good system
should meet. What is missing - I think - is a comprehensive summary of our
expectations, a "code" of such criteria expressed in plain numbers. Such
summaries have already been proposed by experts or "experts" (they are found
in magazines, web sites, books). They are often presented as "objective",
"scientifically defined" goals, but in my opinion the features of a "good"
trading system can only be subjective, depending on different trading styles
(expectations of profitability, risk management, etc). So, what I would like
to see is some statistics about our subjectively defined criteria, in order
to know how far from the average expectations my own systems are. I guess
that such statistics would be quite useful to every one of us, but in any
case would be very useful to me. Therefore, I am kindly asking each one of
you to define your own criteria, completing the following table with values
and/or providing additional criteria or comments.
Though I could hardly see any ethical objections to my request, I prefer to
state that your contribution will not be used for commercial reasons. I am
neither a professional analyst nor a professional trader.
Nevertheless, I have worked a lot on technical analysis simply because I
love to do so. In fact I like analysis much more than trading.
Needless to say, we are not talking about "ideal" systems here, as such
things simply do not exist. We are talking about realistic systems, which
you would feel comfortable enough to trade with, systems that you would
consider reliable enough, profitable enough, safe enough.
Since there are obvious differences between short-term, medium-term and
long-term systems, one may want to provide different standards for each kind
of system, by copying the following table and providing different values for
each kind. If one or more fields are not important enough for you, then do
not provide values for them.
In case you take the time to provide such help, please do not try to guess
other members' opinions, or what an objectively good system would look like.
Instead, describe your own standards below.
Kind of system: ---------- (short, medium, long)
Regarding system report:
Annual gain should be at least ----%
Total trades should be no less than ---- and/or no more than ----
Profitable trades should be at least ----% of total trades
System close drawdown should be less than ----%
System open drawdown should be less than ----%
Max open trade drawdown should be less than ----%
Profit/Loss index should be at least ---
Reward/Risk index should be at least ---
Buy/Hold index should be at least ---
Add more criteria below if you like.
Regarding optimization (avoiding over-optimization and curve-fitting):
Total optimization tests should be less than -----
No more than --- variables should be optimized.
Add more criteria for optimization below if you like.
Regarding system testing:
The above system should be back tested on more than ----- bars, or on more
than -- years of data
and/or
it should have been successfully traded (with real trades) for more
than ----- (specify the period)
Add more criteria for system testing below if you like.
Any help would be very much appreciated.
Thank you all in advance
Stephanos
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