trade per market means that we could stay fully invested all the time by jumping
from trade to trade among three markets. In that case, the net profit from trading
all three markets would be three times the average net profit in Table 20.1, which
would be far greater than the average profit from Table 8.4.
Also note that the average trade length in Table 20.1 is close to five days.
However, as opposed to the maximum trade length behind the surface charts, this
number includes weekends and holidays, which means that the effective trade
length, measured in number of bars, is slightly shorter. The average trade length
also counts the entry and exit bars as full trading days, which means that another
full trading day (or bar) can be deducted from that number.
The number of bars spent in a trade also relates to the average percentage of
profit per trade of around 0.2 percent per trade, as indicated by the surface charts.
Now, 0.2 percent per trade for a trade lasting on average around three days (or around
0.07 percent per day) doesn’t sound like much. But we have to remember that this is
on the average for all trades: Both the average winning and average losing trades
are larger than this. And if we do the math, 0.07 percent per day for a full year isn’t
bad at all, as it actually comes out to a simple (noncompounded) yearly return of 17.5
percent (0.07 * 250 trading days), or a compounded return of 19 percent
(1.0007^250), which is well above the long-term buy-and-hold average of 12 percent.
Trailing-stop Version
Staying with the true-range concept but substituting the stop-loss method with a
trailing stop method produced another profitable stop and exit combination for
CHAPTER 20 Adding Exits 233
Long only: 1 ATR stop loss,
1.5 ATR profit target, 6 bars max. trade length PercProf: 92.31
Trades PercWin NetProfit AvgProfit ProfitStD RiskRatio
Average: 261.09 50.27 109,684.19 452.49 Market
St. Dev: 56.83 3.41 78,567.54 358.72 4,724.28 0.10
High: 317.92 53.68 188,251.72 811.21 5,176.77 Portfolio
Low: 204.26 46.87 31,116.65 93.77 (4,271.79) 1.26
ProfitFactor RiskFactor MaxDD PercDD PercTime AvgLength
Average: 1.29 0.14 57,809.84 30.26 31.18 4.94
St. Dev: 0.23 0.10 32,859.60 18.62 3.84 0.26
High: 1.52 0.24 90,669.44 48.88 35.02 5.20
Low: 1.06 0.04 24,950.25 11.64 27.33 4.68
TABLE 20.1
Results of Stop-loss Version for Hybrid System