Too often when beginners are evaluating and comparing systems' performances, the first and only thing that is on their mind is they want to see and compare which has the highest % of return only. In my opinion, that could be quite dangerous.
Remember that nothing is really free in this world, when you see a system that has a very high % of return, the next few things you should look at (other than at least total trades of more than 50 has been generated) is how much startup capital was used to get that % of return? What is the Maximum (Open & Close) Drawdown as a % of the startup capital used? What is the Standard Deviation of trades as a % of startup capital used? Can you verify the performance yourself?
In short, the % of return is only meaningful when you look at the risk at the same time. They are the different sides of a same coin!
To show you what I meant, I have two different performance summary for you to compare and choose. If you love high % of return alone, you would probably choose the first one. However, if you have lower risk appetite and don't mind a bit lower % of return, you would probably choose the second one, if you have to choose one.
The 1st one...
The 2nd one...
Actually both of them are quite similar, its just that the high % of return for the 1st one is due to much lower startup capital being used compared to the 2nd one. If you can stomach drawdown of more than 90% or you always think that you are the lucky one and would always escape that drawdown when you start trading, then by all means go for the higher % of return one. If you can stomach only maximum drawdown of about 30-40% , then you may want to consider the 2nd one, if you have to choose between the two. Cheers & happy trading!
Disclaimer: Taken from CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
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WHATEVER YOU READ HERE SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS ARE YOUR OWN RESPONSIBILITY.
