Trading Systems and Money Management : A Guide to Trading and Profiting in Any Market

(やまだぃちぅ) #1
For this spreadsheet, the risk–reward ratio is calculated as the average daily
equity growth in percent, divided by the standard deviations of the daily percent-
age returns. These numbers are calculated for the total value of the portfolio,
incorporating the returns for both open and closed out trades. In Figure 27.2, this
value is referred to as the Sharpe ratio. In a more professional spreadsheet, this
value can be calculated on the monthly and yearly period returns, which also takes
other income streams, such as the interest earned on the money in the account, into
consideration. The higher this number, the faster the equity growth in relation to
the fluctuations in the returns.
The profit factor is the gross profit divided by the gross loss from all trades
actually executed. This number will change with ffor two reasons. First, the size
of a specific profit or a loss will depend on the amount invested in that trade,
which depends on the outcome of all trades preceding it. Second, as already men-
tioned, if the fis too high, some trades might be skipped completely.
The formulas for this specific spreadsheet and Figure 26.5 read as follows:
To calculate the ending equity, in cell H2 type: =AG128, where cell AG128
denotes the ending equity for this trading sequence. Remember to change row ref-
erences with the length of the test period and the column reference with the num-
ber of markets.
To calculate the total return, in cell H3 type: (H2C2)/C2, where cell C2
denotes the initial balance (see Figure 26.4).
To calculate the number of trades, in cell H4 type:
COUNTIF(K11:K128,"<>0")COUNTIF(U11:U128,"<>0")
COUNTIF(AE11:AE128,"<>0"), where columns K, U, and AE denote
the results from each trade in Markets 1, 2, and 3, respectively. (See sample
trades for Market 2 in Figure 26.6, other markets not shown.)
To calculate the percentage of winning trades, in cell H5 type:
(COUNTIF(K11:K128,">0")COUNTIF(U11:U128,">0")
COUNTIF(AE11:AE128,”>0”))/H4
To calculate the largest drawdown, in cell J2 type: MIN(AJ10:AJ128),
where column AJ denotes the daily drawdown number for the portfolio (see
Figure 26.7).
To calculate the longest flat time, in cell J3 type: MAX(AK10:AK128),
where column AK denotes the number of days since the last equity high
(see Figure 26.7).
To calculate the risk–reward ratio based on the daily fluctuations in the equi-
ty, in cell J4 type: AVERAGE(AL11:AL128)/STDEV(AL11:AL128),
where columns AL denotes the daily equity fluctuations (see Figure 26.7).
To calculate the profit factor, in cell J5 type:
(SUMIF(K11:K128,">0")SUMIF(U11:U128,">0")

CHAPTER 26 Dynamic Ratio Money Management 315

Free download pdf