I am trying to build a trend following system. Currently, I am backtesting it on historical data. After several thousand operations, the mean profit is positive after commissions, but its standard deviation is quite large. Which ratio of the standard deviation to the mean profit is considered OK? Say, my mean profit is X and its standard deviation is 15*X. Is the ratio 15 enough for the practical running of the system? Or it should be smaller? The average trade duration is 21 days.

  • $\begingroup$ Doesn’t look great to me but it would be good to know how much $X$ is of invested capital. $\endgroup$ – Bob Jansen May 22 at 5:42

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.