You’re creating a trading strategy.
You’ve made some tough decisions about filtering using your column library.
It looks a lot better than when you started.
But is it good enough?
Should you continue optimizing or is it time to send it?
Most traders try to boil this down to a single metric, but doing that comes with too many tradeoffs.
It’s more art than science, but here are the things I look at:
Is the win rate in the range? (Lower win rate strategies are more difficult to trade, so I take this into account.)
Is the profit factor reasonable?
Is the number of trades per day sufficient to keep me interested?
Is the equity curve smooth enough?
Below is an example of one where I’d try one more optimization step to try to improve it:
You might notice a lot of popular portfolio metrics that aren’t in the list above.
Sharpe, Sortino, blah blah blah the list goes on.
I’ll share tomorrow why I keep this list so simple.
-Dave
P.S. Time is running out for the early-bird discount for the Strategy Cruncher. Discount code EARLYCRUNCHER will get you almost 50% off the price forever. You’ll never see that price again after 6/15, so act now before it expires:
Start Using The Strategy Cruncher
“I’ve used Strategy Cruncher to increase size on trades where there’s a stronger edge. In one specific short strategy, I found that the edge increases linearly with a specific parameter. So I decided to scale up the size gradually as that parameter increases. The improvement in the backtest is significant, and now I just need to verify in live trading to verify the edge holds up, but I’m very confident.”
-Fabrizio
