Trading Strategy Analysis using Darwinex & Van Tharp's R-Multiples
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- Опубликовано: 29 авг 2024
- Van Tharp's R-Multiple concept can help evaluate the characteristics of trades within your trading strategy. The 'R' stands for 'Risk' and this is because the R-Multiple is based on the worst-case risk of each trade if it were to close at the stop loss.
The combination of all R-Multiple values to produce an 'R-Multiple Distribution' can provide valuable insight into a strategy's behavior, and aid with understanding the characteristics of the system. R-Multiples can also be combined to produce Van Tharp's Expectancy metric, but more on that next time...
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Content Disclaimer: Past performance is not a reliable indicator of future results. The contents of this video (and all other videos by the presenter) are for educational purposes only and are not to be construed as financial and/or investment advice.
Risk disclosure:
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I already use "R" in all my trading! 🙌
Very good material! I really like to divide the R by the Final Balance to see how many risks a I am to give it all back... Thanks, Mr. Tinsley!
My pleasure
I always used an R multiple ... but never realized there was a formal approach written ... I aim for 3R on all trades ... make SL at breakeven once price crosses 2R ...
But it would be nice if anyone uses a strategy to trail using R values ..
Great video .. can't help but wonder y this gold mine of videos have less views
If I understand it correctly, this is just win/loss ratio at return scale.
The difference is that Win/Loss ratio is an aggregate of all trades. R-Values are "per trade", allowing much more sophisticated analysis of your system to take place. Hope this hleps.
You can also make a fair comparison if you take log values of the equity curve values?
Martyn, R multiples normalize risk and return so any statistical measures are pure. I’ve always like this approach. However, I have an issue with SQN now that I am consuming your content. As I understand, Van Tharp found that SQN was overstating system performance when using more than 100 trades so he limited it to 100. If one doesn’t limit it it is a t-test. But we know 100 trades is an inadequate number of trades to have statistical significance. Seems to simplistic to use.
It seems usefull but I need to understand better this concepts. Ok: now I am writing on 07-05-2021. I think now I understand better: the poupose of this techinique is to separate risk management from money management. Am I right?
For me Leon, the value of R-Values are that they allow you to analyse the results of a system with every trade executed having the same influence in the analysis. If you don't take an apporach like this, more recent trades that were taken whe equity was higher have a bigger influence than smaller trades, and this introduces a bias. R-Values get around this and give a much clearer picture of what is happening, helping you to then make informed decisions about how to improve a system. Hope this helps
@@TradeLikeAMachine Aha. Now I understand. It is something that has to be allways taken into account, otherwise you would be making a big mistake in your analisys. Thanks a lot.