We've all experienced good trades, bad trades and so-so trades. Wouldn't it be better if you had steps you could take to improve the entries and exits of the trades that your system generated to quantify the good from the bad? This article provides basic steps to do so. By Leo J. Zamansky, Ph.D., and David C. Stendahl
Evaluating a trading system performance
is not a trivial task.
Not only does a trader need to
know how much money the
system has made but also how
the system made the money. A
system may be extremely profitable,
but if it does not match
the preferences of the trader
using it, the trader may not
take advantage of its capabilities
and in turn be disappointed with the results. Evaluating
a trading system is also necessary from a technical point of
view to calculate the systemís performance characteristics to
be able to improve on them later. Efficiency of trading serves exactly that purpose.