What statistics are important in back-testing?
There are a number of statistics that are important if you are putting your hard-earned money at risk. Maximum drawdown is important because that, plus required margin, is the absolute minimum amount of money one should have in their account to avoid a margin call with reasonable probability. The average profit per trade is important to know because you must cover your transaction costs, commission plus slippage, before you can start making money for yourself. The number of consecutive losers is a test of how strong your stomach must be to trade the system. Taking away all the details of the particular system, there are two statistics that enable you to assess what performance you can expect. These are the percentage of profitable trades and the profit factor. It is desirable to have as high percentage winners as possible, but not necessary to be greater than 50% to be profitable if you make more on winning trades than you lose on losing trades. Profit Factor is the ratio of Gross Winn
