Best math indicator to identify a good-looking equity line
Author: ALC77
Creation Date: 6/9/2014 11:14 AM
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ALC77

#1
While back testing and optimizing a battery of systems one of the most important factors in order to recognize a good and solid system respect to a poor one is obviously the equity line.

So I am wondering in your opinion which is the best indicator to use for ranking/optimization based on the sharpness of the equity line, the one the most reflect the visual analysis.

In my opinion the factors that are worth to be considered are:

profits/drawdown
(in order to avoid large drawdowns)

average trade
(in order to have a tradable system)

number of trades
(the more the better in order for the model to be statistically valid)

average bars held
(I preferred the systems that are month training more than 4,5 bars to be less dependent on the slippage)

Which formula / indicator are you using?

Thanks in advance
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Eugene

#2
If your visual analysis is similar to mine, preferring a straight equity curve that slopes up without prolonged and/or deep drawdowns, then there's a number of performance metrics that reflect this point of view: Lake Ratio, K Ratio, Ulcer Index for example.