In optimizing my automated trading system I find that certain combinations while increasing the expectancy:
(AverageWin * ProfitableTradesRatio) - (AverageLoss * (1 - ProfitableTradesRatio))
Reduces the number of trades the strategy is making.
So although the expectancy increased dramatically, the number of trades went from 2,000 to just 40 over a 3 year backtest period which is not acceptable frequency of trading.
What performance metric can I optimize to balance this. I'd like to increase the expectancy without reducing the number of trades significantly.
EDIT: Further analysis shows that this is not only a problem with expectancy but other metrics like Max Drawdown that I'm measuring which also decreases as the numbers of trades decrease.
What method can I generically apply to adjust for this? This is not to be confused with SomeMetric "Per Trade". Simply dividing a metric by the number of trades does not seem to allow me to optimize that metric such that I can identify performance gains that have not decreased the frequency of trading.
If this doesn't make much sense, here's some data to illustrate. This is an optimization for "parameter" column (each row is an optimization run). I'm not sure how to identity whether there is any meaningful increase in expectancy (or decrease in max drawdown) by increase said "parameter" since the number of trades depletes along with each metric.
parameter total trades expectancy expectancy per trade max drawdown
0 710 233.2957746 0.328585598 -1.389104131
2 640 158.53125 0.247705078 -1.799492989
4 559 129.9463327 0.232462134 -2.127999294
6 478 106.6945607 0.223210378 -1.463252512
8 402 134.6641791 0.33498552 -1.364193967
10 349 176.0601719 0.504470407 -1.196254362
12 303 134.4224422 0.443638423 -1.114376551
16 225 193.6222222 0.86054321 -0.657900215
20 181 242.3480663 1.338939593 -0.558306147
25 135 514.6296296 3.812071331 -0.493760619
30 106 47.16981132 0.44499822 -1.471772548
35 85 206 2.423529412 -1.482912119
I can't tell if it's worth decreasing the trading frequency for these performance gains. Anything under 300 trades in 3 years is not even an acceptable frequency of trading.