Profitability: Difference between revisions
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'''Profitability''' (also called '''salability''' or '''saleability''') is a [[technical analysis]] term used to compare performances of different trading systems or different investments within one system. Note, it is not simply another word for [[profit]]. There are varying definitions for it, some as simple as the expected or average ratio of revenue to cost for a particular investment or trading system. Others can be complex or counter-intuitive. |
'''Profitability''' (also called '''salability''' or '''saleability''') is a [[technical analysis]] term used to compare performances of different trading systems or different investments within one system. Note, it is not simply another word for [[profit]]. There are varying definitions for it, some as simple as the expected or average ratio of revenue to cost for a particular investment or trading system or "ratio of the number of winning trades or investments to the total number of trades or investments made, a number ranging from zero to 1."<ref>{{cite journal|journal=(incomplete excerpt) Technical Analysis of Stocks & Commodities Magazine|first=Michael|last=Harris|date=September [[2002]]|title=Improve Your System With The Profitability Rule|url=http://www.traders.com/Documentation/FEEDbk_docs/Archive/092002/Abstracts_new/Harris/harris.html}}</ref> Others can be complex or counter-intuitive. |
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The following definition was published in the journal ''Technical Analysis of Stocks & Commodities Magazine'':<ref> |
The following definition was published in the journal ''Technical Analysis of Stocks & Commodities Magazine'':<ref>ibid</ref> |
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:Profitability = nProfits/nTrades - 1/(1+aveProfit/aveLoss) |
:Profitability = nProfits/nTrades - 1/(1+aveProfit/aveLoss) |
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Revision as of 21:55, 8 April 2008
Profitability (also called salability or saleability) is a technical analysis term used to compare performances of different trading systems or different investments within one system. Note, it is not simply another word for profit. There are varying definitions for it, some as simple as the expected or average ratio of revenue to cost for a particular investment or trading system or "ratio of the number of winning trades or investments to the total number of trades or investments made, a number ranging from zero to 1."[1] Others can be complex or counter-intuitive.
The following definition was published in the journal Technical Analysis of Stocks & Commodities Magazine:[2]
- Profitability = nProfits/nTrades - 1/(1+aveProfit/aveLoss)
This is computed for each system or investment being compared over the same period long enough to include significant "ups" and "downs". A suitable period is something like the last 5 to 20 years.
References
- ^ Harris, Michael (September 2002). "Improve Your System With The Profitability Rule". (incomplete excerpt) Technical Analysis of Stocks & Commodities Magazine.
{{cite journal}}: Check date values in:|date=(help) - ^ ibid