The following table lists the most important tradingsystems parameter and explains them.

Important Tradingsystem-Parameter

Invested capital (start capital)

This reference number shows your capital which you have at the free possession and have invested in a position.

Net profit (absolutely) corresponds to the final capital

Start-Capital - This parameter expresses how much money has gained with a tradingsystem. The trading fees and a possible spread should be considered as well (difference of purchase and selling price at one time).

Net profit / year

This reference number expresses how much money has gained with a tradingsystem per year.

Net profit %

Your profit in % (in relation to the used capital)

Net profit % / year

Your profit in % per year (should lie with at least on average 15%) considered more than at least 10 years.

Net profit (absolutely) / DrawDown

This reference number is one of the most important parameters for the evaluation of a Tradingsystem. The higher this value is, the better this is. It puts the profit to the taken risk in the relation.


Relation of the trading results all profit to the loss-trades. Successful tradingsystems should show a value of at least 2.5. One of the most important reference numbers for the evaluation of tradingystems.

Time in the market (TIM)

Specifies in % how long your system is invested. 50% means that your tradingsyytem within the whole analysis period is invested in half of the time in the market.

Total number of the Trades (Trading frequence)

The total number of the Trades should not be too high, because fees per trade accumulate and stockbroker would like to trade not too often. But also for this reference number is valid that she/it should be tuned to your personal profile.

Number Loss-Trades

Number of the Trades with a loss.

Number Winner-Trades

Number of the Trades with a profit.

Percentage of profitable Trades (Hit rate)

Relation of the number of profit to loss-Trades. Successful tradingsystems can also show a value smaller than 50%. This parameter is often overrated.

The biggest winning trade

The highest absolute profit of all the Trades.

The biggest losing trade

The highest absolute loss of all the Trades.

The biggest winner to the biggest loser ratio

The reference number presents for a considered period, the biggest loser or winner in each case. They should have no bigger outliers in any direction. Their profits / losses should spread ideally about your Trade steadily (this is a sign for a well-balanced tradingsystem).


Consecutive losers (in a row)

This reference number specifies how many trades achieved losses one after the other. Often one doubts a system if too many loss-afflicted Trades appear. This value is also known as a stress factor.

Consecutive winners (in a row)

This reference number specifies how many trades earned profits one after the other

DrawDown (also called stress factor)

This value states how much money you would have lost in the worst trading period. This value should be recorded in your risk consideration or tradingsystem valuation absolutely with. They should prefer tradingsystems with a low Drawdown. A high Drawdown stands for psychological stress. Only if you are sure that you can really cope with the ascertained losers with his at most possible loss, you should use the tradingsystem. This reference number often causes a strong psychological pressure on the investor. Their growth capital curve should be growing very steadily.

Medium result per Trade

This value gives you how much money you win or lose on average per Trade. Besides, the average about all winners and losers is determined. Here is valid a simple rule - the higher the better. This value is for the evaluation of a tradingsystem one of the most important values.

Medium result per trading day

This value gives you how much money you win or lose on average per Trading day. Besides, the average about all winners and losers is determined. Here is valid a simple rule - the higher the better. This value is for the evaluation of a tradingsystem one of the most important values.


Susceptibility of a system compared with disturbances. How constant the results with variation remain the initial parameter.

Alpha and beta value

"Alpha" is the income return of an investment which is achieved by active management of a investment. Alpha, so the income return in comparison to the index, is a result of the investment expertise. "Beta" is designates as the market risk of a stock market.
Target: Establish a tradingsystem that shows alpha > beta.


Application and optimization of Tradingsystems
(Tips and tricks)

Entry points

- Create your personal Trading profile as a basis of your goal tracking.
- Use only the tradingsystems which fit to your Trading profile (It makes no sense to place on systems that often act, if you prefer to act only some times in the year.)
- Try to understand the idea and the strength of the tradingsystems (e.g., trend follower’s work very well in trend phases)
- Try to understand the weaknesses of the system (e.g. trendfollowers work rather badly in sideward phases)

-If you act with stocks consider also the trend of the market (e.g., VIX - the volatility of the indexes)


Test parameter

Test period:
- Test your tradingsystems with different periods (1, 2, 3 and 5 years) and compare the results.
- Test your tradingsystems possibly for all phases (in upward, down and sideward trends)
Successful tradingsystems should also work in downward trends (or get out).

Test values:
- Test your tradingsystems with different markets:
- Standard & Poor's Composite
- Nasdaq Composite
- Dow Jones Industrial average
- Nikkei etc.

Prefer markets over stocks
(Annual general meetings or result-announced are able to drag a stock strongly down).


Exit points

- Delimit possible losses with money management methods.
- Exit points are more important than entry points (only with good entries you will realize profits).
- Loss limitations should not be too scarcely placed (with trend systems would be able to filter usually big winners out. -> adapt this to the market price volatility.)
- always define your exit points before you buy your stocks
(therefore avoid emotional action the "enemy of automated tradingsystems").


Other important requirements for tradingsystems

Robustness and optimization:
  • Optimize your systems (e.g., with different indicators and simple variation of the parameters)
  • Your goal of the optimization should be:
    1. Minimization of the drawdowns
    2. Reduction of the trade frequency
    3. Improvement of the trading result (profit)
    4. Increase of the profit factor.

  • Don't over optimize your tradingsystems though (they lose therefore often to robustness).
    The study of the Equity charts is suited for a well-balanced relation of optimization / over optimization (profit-development/time (these should rise very linearly)
  • Don't rely only on one just indicator.
  • Use no more than 5 indicators (the systems should remain very simple).
  • Act strictly according to your installed tradingsystem rules - otherwise the whole work is worthless!
And last but not leasst : test,test,test!
A lot of success on the stock exchange market!






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