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

stops and exit techniques. For now, let’s just state that we should not stay in a trade

for any longer than what can be validated by the entry signal and the underlying

fundamental reason why this signal came about. Obviously, it does not make sense

to enter into a six-month trade based on a three-day pattern.

The reason why this currently is the case can be found in the rudimentary

stop-loss and profit-target exits. The stop was set in such a way that it would be

sufficiently far from the entry so that we wouldn’t be stopped out immediately

166 PART 2 Trading System Development

Original system, long only PercProf: 81.54

Trades PercWin NetProfit AvgProfit ProfitStD RiskRatio

Average: 50.20 34.10 62,126.82 1,295.04 Market

St. Dev: 11.73 7.70 64,447.90 1,344.95 8,337.05 0.15

High: 61.93 41.80 126,574.73 2,639.99 9,632.09 Portfolio

Low: 38.47 26.40 (2,321.08) (49.90) (7,042.01) 0.96

ProfitFactor RiskFactor MaxDD PercDD PercTime AvgLength

Average: 1.48 0.28 42,058.76 31.15 25.77 23.55

St. Dev: 0.52 0.29 18,687.90 18.84 14.41 19.33

High: 2.00 0.57 60,746.66 49.99 40.18 42.88

Low: 0.96 (0.01) 23,370.87 12.31 11.37 4.22

TABLE 14.1

Retesting Results of Harris 3L-R Pattern System

Original system, both sides PercProf: 61.54

Trades PercWin NetProfit AvgProfit ProfitStD RiskRatio

Average: 105.51 26.71 21,948.35 30.20 Market

St. Dev: 20.61 5.53 75,765.43 822.11 6,720.68 (0.02)

High: 126.11 32.24 97,713.78 852.31 6,750.87 Portfolio

Low: 84.90 21.18 (53,817.09) (791.91) (6,690.48) 0.04

ProfitFactor RiskFactor MaxDD PercDD PercTime AvgLength

Average: 1.10 0.06 76,602.44 63.90 32.56 12.80

St. Dev: 0.29 0.20 31,358.80 31.53 13.19 5.49

High: 1.39 0.26 107,961.24 95.43 45.75 18.29

Low: 0.81 (0.14) 45,243.64 32.38 19.37 7.30

TABLE 14.2

Short-side Trading