average profit per trade by the average number of days in a trade, you will find that
it is slightly higher for this version than the previous one. In fact, the good news
is that this value stays above $100 per bar, which means that the average profit per
bar in a trade will be 0.1 percent, given that we invest $100,000 per trade (100 /
100,000 * 100).
If we can be in a trade every trading day of the year, making 0.1 percent per
day, the noncompounded return will be 25 percent per year (0.1 * 250), given an
initial investment of $100,000, which is way more than the long-term average for
the market as a whole. Remember, however, these numbers do not include slippage
and commission. But this is counterweighted by the possibility of compounding
the returns when trading several markets within one portfolio. More about this in
Part 4.
Another piece of good news is that the time spent in the market is much
lower for this version of the system. This increases the possibility of compound-
ing the returns when trading several markets and systems at once. The less time
spent in the market for any specific system–market combination, the more room
we have to diversify. The more systems and markets we can trade, the faster we
can compound our returns.Trailing-stop Version
Basically, what could be said about the stop-loss method of this system also can be
said about the trailing-stop method, except the results for the trailing-stop version
are a tad lower, which Table 20.8 illustrates. Note especially that, despite a higherCHAPTER 20 Adding Exits 247
Long only: 0.4% stop loss,
3% profit target, 4 bars max. trade length PercProf: 83.08
Trades PercWin NetProfit AvgProfit ProfitStD RiskRatio
Average: 157.95 37.78 45,342.07 296.69 Market
St. Dev: 40.00 7.68 47,437.17 324.30 2,915.76 0.10
High: 197.95 45.45 92,779.24 620.99 3,212.45 Portfolio
Low: 117.95 30.10 (2,095.09) (27.61) (2,619.07) 0.91
ProfitFactor RiskFactor MaxDD PercDD PercTime AvgLength
Average: 1.38 0.21 29,338.37 21.44 10.20 2.74
St. Dev: 0.47 0.25 16,921.27 15.53 1.91 0.21
High: 1.84 0.46 46,259.64 36.97 12.11 2.94
Low: 0.91 (0.05) 12,417.10 5.91 8.29 2.53TABLE 20.7
Results of Stop-loss on Harris 3L-R Pattern Variation