Trading Numbers Rajeev Shukla. Kelly’s formula Kelly % = (Win% − Loss %)/(Average Profit/Average Loss) For example, assume a strategy that has a winning.

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Trading Numbers Rajeev Shukla

Kelly’s formula Kelly % = (Win% − Loss %)/(Average Profit/Average Loss) For example, assume a strategy that has a winning percentage of 55 percent, an average win of 1,750, and average loss of 1,250. The Kelly percent will tell us what percentage of our trading capital to risk is on the next trade. Kelly % = (55 − 45)/(1,750/1,250) Kelly % = 10/1.4 Kelly % = 7.14%

Perfect Profit -- Robert Padro Perfect Profit is the sum total of all of the potential profit that could be realized by buying every bottom and selling every top. More precisely, it is the sum of the absolute value of every price swing formed between a price peak and a subsequent price valley. An unachievable ideal measure.

Model Efficiency Model Efficiency = Net Profit/Perfect Profit For example, if net profit = 25,000 and a Perfect Profit = 300,000 for the historical period traded, Model Efficiency = (25,000/300,000) × 100 Model Efficiency = 8.33 percent Trading strategies with MEs > 5 percent -- very good.

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