I’d like to ask everyone, how do you all improve your Profit factor? Here’s the strategy I’ve recently shared, but despite numerous adjustments, the PF remains below 2. Are there any other areas to improve upon when creating an EA or strategy?
The current strategy is simply a 1:2 risk-reward ratio, coupled with a trailing stop mechanism to lock in some profits. However, profitability seems to suffer if not built upon this foundation. I’m curious to know how others manage to create strategies with higher PF values.
Locking in profits, exiting a winning trade, the hardest problem in trading.
A risk:reward ratio of 1:2 is probably the maximum realistic level over a large number of trades. Of course, you might get the occasional 1:10 but they are so rare they are hard to plan for.
It is possible to improve the risk:reward by pyramiding winning trades. This reduces the win rate because there will be more losing trades and more break-even trades. But the size of the winners is unlimited, while capital at risk per series of trades does not increase. The classic approach is to add a second trade when the profit on the first trade equals the loss if the first trade’s stop-loss had been hit. Repeat this if price continues to move in your direction.
To improve your Profit Factor (PF), fine-tune both entry and exit strategies. Experiment with different indicators for better entry points and adjust your trailing stop for optimal risk-reward balance. Regularly analyze and adapt your strategy to market changes, focusing on where losses typically occur. Continuous testing and adaptation are key.
I made some adjustments that indeed improved the PF. In the screenshot below, I increased the permissible number of open positions and noticed that while the PF increased, the overall average profit decreased, and the MDD also increased. Usually, among PF, average profit, and MDD, which parameter field is more important?
I personally believe it’s MDD > average profit > PF.
