Trading Systems

Algorithmic Forex Trading: What it is and How it Works?

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Algorithmic trading is a form of trading in which you use an algorithm, based on a set of predefined parameters, to open or close positions on your behalf. Algorithmic trading aims to eliminate the human factor (psychotrading) and instead follows predetermined strategies based on statistics that can be executed while the market is open, using an algorithm with minimal supervision. … Read more

The SQN ratio (System Quality Number)

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The SQN ratio of a trading system

Introduced by Van Tharp in 2008 in his book The Definitive Guide to Position Sizing, the System Quality Number, abbreviated as SQN, is an indicator designed to evaluate or measure the performance of a trading system or strategy. Subsequently, some variants and uses of the original formula have emerged that I consider very interesting; in particular to obtain sets of … Read more

Forex Trading System Scalping Gold

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In this article, we are going to introduce a scalping trading system designed for trading spot Forex and precious metals which can be quite profitable if the trader follows the rules carefully. This system is based on custom technical indicators for Metatrader 4, so unfortunately it can only be used on this trading platform. Firstly, it uses a trend indicator … Read more

Intraday Trading System Using Moving Averages and Stochastic

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15 minutes intraday trading system

This  is quite simple intraday trading system for 15 minutes candlestick charts which is based on exponential moving averages (EMA) and the stochastic oscillator. The rules of this strategy are very simple as we shall see below: This trading system is specifically designed for intraday trading. For this reason all open positions using this technique should be closed at the … Read more

How to calculate the mathematical expectation of a trading system

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Calculating the mathematical expectation of a trading system is one of the first things that should be done to know if the system is capable of making money in the long term. Having a positive mathematical expectation is an indispensable condition that any moderately reliable system must meet.

The mathematical expectation measures the amount that is expected to be won or lost on average for each trade we do. For its calculation to be reliable, it is best that we take into account as many trades as possible.

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How to Measure a Trading System? – Ratios to assess your performance and risk

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Example of equity drawdown

When you design a trading system, or you are looking to buy an automatic robot on the market, you must make decisions according to your preferences. The first thing you should ask yourself is: what am I looking for?

It is clear that you are looking to earn a lot of money, yes… this is what we all seek. But after a few losses and disappointments you learn that in Forex and other markets there are no magic methods and that the perfect trading system does not exist.

So, the right question is: how can you evaluate and compare different trading systems according to their risk level and potential benefit to know if they are viable for your use?

In this article we are going to review different statistical metrics to assess the performance of an investment system.

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