The Best Figures For Evaluating A Trading Strategy


Legendary stock traders keep emphasising that if an individual can learn how to preserve capital in the stock market, they can definitely learn the right approach to multiply it smartly. One of the ways is employing the best strategy or system for online trading. 

Stock traders can utilise numerous strategies in the hope of consistent returns. Employing the best trading strategy or system to make profits and reduce losses is the key focus of traders for long-term success. Learning fundamental or technical analysis is vital to benefit from the market opportunities. Many traders take positions based on fundamentals, while others find technical analysis as the only way to make profits. 

Several parameters can be used to evaluate a trading strategy. A few of these are the Sharpe ratio, the Sortino Ratio, the risk-reward ratio, the maximum drawdown, the maximum losing streak, expectancy, etc. The most crucial among these is the Sharpe Ratio. It measures the returns of the trading strategy in relation to risk and volatility.

The formula used to calculate annualized Sortino Ratio is similar to the annualized Sharpe Ratio. But it is based on a standard deviation of the negative variations instead of the whole portfolio evolution’s variations. In other words, it penalizes the risks that led to losses and not the risks that led to profits because taking those risks is necessary.

Using such parameters, traders can determine the best figures to employ the best trading strategy and filter out inefficient ones. 

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