So I wanted to know what it would look like if I were to “win” about 45% of my trade using a Risk:Reward (R:R) ratio of 1:2. I started playing around with excel and came up with the following spread sheet. Simply, I created a biased random number generator. When you press the Calculate button the spreadsheet will randomly generate 300 trades. In the win/lose column you will see either a “0” or a “1”. 0s are loses and 1s are wins. The spreadsheet will roughly give you the percentage of wins you put into the “Win Ratio”.
It is really easy and to use, 5 simple steps.
First, Enter your starting capital as seen here.
Second, enter in the amount you wish to risk per trade.
Third, enter you desired R:R. (Hint: Be Realistic!!!)
Fourth, enter in the percentage of “winning” trades. (Note: The percentage is in decimal form so 60% = .6)
Finally, press the Calculate button.
What I like about this is it shows that even if I were about 60% correct I will still have draw downs! When you set the Win Ration to 45% it shows how many more trades it will take for you starting capital to grow some desired amount.
you need to be registered to download right? could you upload it somewhere else?
and one suggestion: as it is (if i understand it correctly) it is not of much use. i know you said it’s just for fun, and that it is. but it could be made useful, if you let it simulate like 10000 paths (10000 times the 300 trades). then you can let excel plot to see how the different paths move, where they end, can see the extremes.
even more useful would then be the calculation of a 90%, 95% and 99% confidence interval. then you know better what to expect after 300 trades. then you could also vary the number of trades. make them less, and more to see what influence that has on the confidence interval. ah, and give the mean and standarddeviation of course, but you need that for the confidence intervals anyways.
Honestly I like to spend my time analyizing the historical performance of various mechanical systems. I am a firm believer that systems can be optimized using statistics.
This is how I decide where to place my stop, as seen below.
I actually just modeled this system in Excel and then I use a software called EasyFit and StatAsssist (student version) to explore where I should place my stop and profit targets. In the pic below you can see in the right red circle that I have my stop set at -40 pips and my profit target at 90 pips for this specific system. Basically my statistics for this system tell me that I have a 12% probability of being stopped out and a 54% chance of hitting my profit target.
Since Im a novice at applying stats, your comments and suggestions are welcome as I hope to post some of the statical test I’ve been working on lately.
