A Strategy with Lower Total Profit Can Be Better...

In the email on removing trades to add confidence in your strategy, I shared this chart showing two different versions of a strategy I created with the Cruncher:

In this case, the version with fewer trades didn't sacrifice any total profit.

Fewer trades for the same profit is clearly a big win.

You won't always be able to find such a clear-cut case.

Often, you'll find rules that, when applied, end up with less total profit.

It's a mistake to dismiss these rules for that reason alone.

For example, here's another version of the same strategy with another rule applied that ends up with less total profit (see how the blue line ends up lower than the red line).

OK, total profit is less, but...

And this is important.

There are 20% fewer trades in the blue line than in the red line!

The same strategy, but you're just skipping 80% of the signals and taking the remaining 20%.

And ending up with almost the same total profit.

Which strategy is more efficient?

Which strategy spends LESS time in the market to achieve almost the same profit?

Which version of the strategy would you have more confidence in to trade with bigger size over time?

-Dave

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