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I’m missing the option to create new “Trading Objective Functions” or to combine already existing functions (add/subtract/divide/multiply functions) to create new trading objectives.
Many of the currently available functions are relatively useless as most of them fall into three categories:
- Not considering profit: For example, optimizing for “Minimize Max Drawdown” without considering profitability is useless. After all, the primary goal of traders is to make money.
- Not considering risk and variable returns: Objectives like “Maximize Return on Account” or “Maximize Net Profit” ignore some very important factors for any trading system like drawdowns and uneven distribution of returns.
- Considering profit and risk as equally important. Many of the available trading objectives work by dividing profitability width some risk measurement (standard deviation, drawdown etc.). A major problem with this approach is that systems generating very little returns are ranked very high if they also are considered low risk. For example, MAR will rate a system giving 1% profit per year width a drawdown of 0,5% equally high as a system returning 50% per year width a max drawdown of 25%. This is obviously not what we want. The same applies to other objectives like “Ulcer Performance Index “, “Ratio Net Profit / StndDev Profit”, “Sharpe Ratio” and more.
Many other already existing trading objectives will also make much more sense combined with each other. For example “Maximize #Winners / #Losers” is useless in itself as it totally ignores both the number of trades and the profit of the trades. A system with 10 winning trades generating 1% profit each and one losing trade generating a 10% loss (0% total profit) will be rated much higher than a system width 9 winning trades generating 10% each and two losing trades generating a loss of 1% each (88% total profit).
However, if we were able to combine “Maximize #Winners / #Losers” width “Expectancy” (the Average Trade Profit divided by the Average Losing Trade Loss) we would have a much more useful trading objective.
It would be a big improvement to NeuroShell Trader if we could match and mix trading objectives ourselves through the software in order to create custom trading objectives fitting our own preferences and risk tolerance.
We will pass your thoughts to the developers.
Ronny,
I agree with your analysis of the objectives – most of them are useless because they ignore a number of trades, profitability and drawdown.
Ward Systems could remediate that with low effort.
I hope other forum members would chime in on this topic and push Ward Systems to improve the trading objectives functionality.
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