it, but most important numbers are a little on the low side. But is it really worth
trading it from both sides for the downside protection in case of prolonged down-
trends, given the fact that the short side also decreases the overall and long-term
risk–reward relationship? This is a difficult question to answer, and something you
have to do for yourself, considering your own preferences. The question you need
to ask yourself is, “Am I willing to sacrifice some trading comfort (and profit) dur-
ing normal circumstances, to be better prepared to make a profit (or at least scrape
by) during the downtrends?” If the answer is yes, you should trade the short side
as well; if it’s no, you should stick to the long side only.
Table 15.4 illustrates the robustness of this system, traded from both sides.
For Table 15.4, the random number generator (RNG) was left on and the system
tested 10 times each on all markets for a total of 650 test runs. Because the RNG
sometimes allows the system to enter into a trade, and at other times it doesn’t,
each trading sequence is unique and can consist of any and all of the signals gen-
erated. As you can see, this resulted in an even higher average profit per trade and
higher profit and risk factors than in the original system, tested the normal way.
Thus, only trading the first signal in a series of signals isn’t the most lucrative
thing to do. However, with additional profit potentials comes additional risk. With
a risk–reward ratio of 0.92, this version is slightly riskier to trade than the original
version. Lower one-standard-deviation boundaries for the profit and risk factors
confirm this observation.
One way to alter the original system is to substitute the fixed stop loss with a
trailing stop that, for example, exits a long trade if the market falls a certain amount
from the most recent highest high or highest close, or from the entry price imme-
diately after the entry. All trades require a certain amount of leeway to be able to178 PART 2 Trading System Development
Original system, short only PercProf: 69.23
Trades PercWin NetProfit AvgProfit ProfitStD RiskRatio
Average: 170.88 29.80 18,437.41 123.15 Market
St. Dev: 57.00 7.06 64,994.32 457.02 3,399.69 0.03
High: 227.88 36.86 83,431.72 580.17 3,522.84 Portfolio
Low: 113.88 22.75 (46,556.91) (333.88) (3,276.54) 0.27
ProfitFactor RiskFactor MaxDD PercDD PercTime AvgLength
Average: 1.12 0.07 48,524.51 41.45 18.25 4.34
St. Dev: 0.33 0.22 31,726.67 32.58 7.96 1.30
High: 1.45 0.29 80,251.18 74.03 26.21 5.63
Low: 0.80 (0.15) 16,797.84 8.87 10.29 3.04TABLE 15.3
Short-side Trading Using Original Expert Exits System