P&L Forecaster Using Average Win, Win Percentage and Win/Loss Ratio




The P&L Forecaster is for discretionary and automated traders who wish to forecast their future P&Ls and gain insight and understanding into their edge in the markets.

The Forecaster is based on the average win, win percentage and win/loss ratio of trades for a trader, trading system or portfolio. The path is generated using a normal distribution (bell curve) around the inputs.

To use the P&L Forecaster, enter the average win, percent wins and win/loss ratio and press "Forecast".

For example, to get a two year P&L forecast, enter statistics from your historical weekly results. The forecast will then correspond to the next 100 weeks of trading.

Notes
Running the Forecaster multiple times will yield different paths to similar forecasts.

There is as much information in the path and its slope as their is in the endpoint; remember it's a forecast and not a guarantee.

Average Win:            Percent Wins:    

Win/Loss Ratio:        



Things to Try
See how changing any single parameter changes the path.

Note that the peaks and valleys represent run-ups and drawdowns in P&L

Keep the average win fixed and increase/decrease the percent wins or win/loss ratio. Try and average winning trade of 0.

Enter the statistics from your weekly results to get a P&L forecast for the next 2 years.

Use the Forecaster to examine individual trading system results.

The P&L Forecaster and the Axiom of the Small Edge are helpful in learning about how a P&L moves and the paths a P&L may take.

For more information on basic trading statistics, see Introduction to Testing Trading Ideas.



Henry Carstens
Vertical Solutions
carstens@verticalsolutions.com