Would anyone be able to help me figure out the formula to calculate the required strike rate for a trading strategy i.e. what strike rate would be required to break even for a given strategy? There's plenty on the web for straight betting strategies but I cannot find much for trading.
As an example, for an average win of £5 and average loss of £2 a strike rate of 28.6 works out about break even. I did this through trial and error but could not figure out the formula to calculate it quickly. Does anyone have any ideas?
Required Strike Rate Formula
Thank you. This is what I initially thought but it's not working out for me.
Over 100 trades win £5 lose £2 that would be more than break even
win 40 x £5 = £200
lose 60 x £2 = £120
whereas over 100 trades the following would be more break even?
28.6 x £5 = £143
71.4 x £2 = £142.8
I think I'm missing something here, I'm not quite getting this.
Over 100 trades win £5 lose £2 that would be more than break even
win 40 x £5 = £200
lose 60 x £2 = £120
whereas over 100 trades the following would be more break even?
28.6 x £5 = £143
71.4 x £2 = £142.8
I think I'm missing something here, I'm not quite getting this.
- MemphisFlash
- Posts: 2158
- Joined: Fri May 16, 2014 10:12 pm
- Location: Leicester
are you factoring into the equation the commission on winng trades?
- ShaunWhite
- Posts: 9731
- Joined: Sat Sep 03, 2016 3:42 am
When....
AvgUp is +ve
AvgDn is -ve
and SR = 0 -> 1
PL gross = (AvgUp * SR ) + (AvgDn * (1 - SR))
So rearrange the equation for where (AvgUp * SR ) + (AvgDn * (1 - SR)) = 0 to find SR.
This might be a long way round but....
1. (AvgUp * SR ) + (AvgDn * (1 - SR)) = 0
Take away (AvgUp * SR ) from both sides...
2. AvgDn * (1 - SR) = - AvgUp * SR
Divide each side by (1 - SR)....
3. AvgDn = - (AvgUp * SR) / (1 - SR)
Divide each side by AvgUp...
4. AvgDn / AvgUp = - SR / (1 - SR)
Well I've got SR on one side of the equation but now I'm stuck too
I think that's right because 2/5 = .286/.714 from your example.....so your 28.6% is correct. I just don't have the time now to remember my maths about how to rearrange #4 to have only SR on one side
SURELY someone on here has got o-level maths they can remember! If we can't go that extra step then Excel's Goal Seek is my default option.
AvgUp is +ve
AvgDn is -ve
and SR = 0 -> 1
PL gross = (AvgUp * SR ) + (AvgDn * (1 - SR))
So rearrange the equation for where (AvgUp * SR ) + (AvgDn * (1 - SR)) = 0 to find SR.
This might be a long way round but....
1. (AvgUp * SR ) + (AvgDn * (1 - SR)) = 0
Take away (AvgUp * SR ) from both sides...
2. AvgDn * (1 - SR) = - AvgUp * SR
Divide each side by (1 - SR)....
3. AvgDn = - (AvgUp * SR) / (1 - SR)
Divide each side by AvgUp...
4. AvgDn / AvgUp = - SR / (1 - SR)
Well I've got SR on one side of the equation but now I'm stuck too
I think that's right because 2/5 = .286/.714 from your example.....so your 28.6% is correct. I just don't have the time now to remember my maths about how to rearrange #4 to have only SR on one side
SURELY someone on here has got o-level maths they can remember! If we can't go that extra step then Excel's Goal Seek is my default option.
- ShaunWhite
- Posts: 9731
- Joined: Sat Sep 03, 2016 3:42 am
hang on ... 5/7 is 0.714
so
2/7 = 0.286
SrRqd = AvgDn / (AvgUp + abs(AvgDn)) ??
so
2/7 = 0.286
SrRqd = AvgDn / (AvgUp + abs(AvgDn)) ??
- ShaunWhite
- Posts: 9731
- Joined: Sat Sep 03, 2016 3:42 am
I think that's it
Dn Up SR PL
1 5 0.167 0
2 5 0.286 0
3 5 0.375 0
4 5 0.444 0
5 5 0.500 0
6 5 0.545 0
7 5 0.583 0
8 5 0.615 0
9 5 0.643 0
10 5 0.667 0
5 1 0.833 0
5 2 0.714 0
5 3 0.625 0
5 4 0.556 0
5 5 0.500 0
5 6 0.455 0
5 7 0.417 0
5 8 0.385 0
5 9 0.357 0
5 10 0.333 0
Dn Up SR PL
1 5 0.167 0
2 5 0.286 0
3 5 0.375 0
4 5 0.444 0
5 5 0.500 0
6 5 0.545 0
7 5 0.583 0
8 5 0.615 0
9 5 0.643 0
10 5 0.667 0
5 1 0.833 0
5 2 0.714 0
5 3 0.625 0
5 4 0.556 0
5 5 0.500 0
5 6 0.455 0
5 7 0.417 0
5 8 0.385 0
5 9 0.357 0
5 10 0.333 0
Avg Loss / (Avg Win + Avg Loss)
2 / ( 5 + 2 ) = 28.6% Required Strike Rate
-
- Posts: 3140
- Joined: Sun Jan 31, 2010 8:06 pm
thomsch wrote: ↑Mon Mar 18, 2019 11:44 amThank you. This is what I initially thought but it's not working out for me.
Over 100 trades win £5 lose £2 that would be more than break even
win 40 x £5 = £200
lose 60 x £2 = £120
whereas over 100 trades the following would be more break even?
28.6 x £5 = £143
71.4 x £2 = £142.8
I think I'm missing something here, I'm not quite getting this.
Remember you're simply looking for a balanced equation where you know most of the variables, If we call x your strike rate then your losing percentage is simply 100-x
so x * 5 = (100-x) * 2
5x=200-2x
7x=200
x=200/7
x=28.57
If we call average win W and average loss L our equation simply becomes
x * W = (100-x) * L
xW=100L -xL
xW + xL =100L
x(W+L)=100L
x = 100L/(W+L)
- ruthlessimon
- Posts: 2094
- Joined: Wed Mar 23, 2016 3:54 pm
Out of interest, how are you planning to utilise this figure?
I'd rather know if the strategy was +ve expectancy in the 1st place; rather than what strikerate I need to make it >0
Thank you everyone for your help, this is very useful.
I've begun trading football and the few strategies that I have rely on a goal for profit. I've been recording my results wins, losses, total trades, p/l, strike rate, average win/loss and been calculating the Average Profitability Per Trade ( for anyone who's interested the formula for this is: APPT = (Win Probability x Avg Win) - (Loss Probability x Avg Loss) there's a nice article on the web that I could post a link for anyone who's interested)
My p/l obviously shows me whether I'm in profit or not for a given strategy and the APPT gives me an expectancy for each trade that I make. I thought the Required Strike Rate (RST) would be an excellent figure to record as I can compare it with my Actual Strike Rate (ASR) to see how well the strategy is performing but more importantly, how well I'm performing when reading a football match for a goal. If my ASR is a lot lower than the RST I could consider abandoning the strategy. However, if the two figures are close I can look for areas to tweak to push a strategy in to profit.
I've begun trading football and the few strategies that I have rely on a goal for profit. I've been recording my results wins, losses, total trades, p/l, strike rate, average win/loss and been calculating the Average Profitability Per Trade ( for anyone who's interested the formula for this is: APPT = (Win Probability x Avg Win) - (Loss Probability x Avg Loss) there's a nice article on the web that I could post a link for anyone who's interested)
My p/l obviously shows me whether I'm in profit or not for a given strategy and the APPT gives me an expectancy for each trade that I make. I thought the Required Strike Rate (RST) would be an excellent figure to record as I can compare it with my Actual Strike Rate (ASR) to see how well the strategy is performing but more importantly, how well I'm performing when reading a football match for a goal. If my ASR is a lot lower than the RST I could consider abandoning the strategy. However, if the two figures are close I can look for areas to tweak to push a strategy in to profit.
- ruthlessimon
- Posts: 2094
- Joined: Wed Mar 23, 2016 3:54 pm
I can see the logic in that; but the bit that troubles me, is over what period the strikerate gets measured.thomsch wrote: ↑Tue Mar 19, 2019 10:13 amI thought the Required Strike Rate (RST) would be an excellent figure to record as I can compare it with my Actual Strike Rate (ASR) to see how well the strategy is performing but more importantly, how well I'm performing when reading a football match for a goal. If my ASR is a lot lower than the RST I could consider abandoning the strategy. However, if the two figures are close I can look for areas to tweak to push a strategy in to profit.
I might add RST to my sheets; but the metrics I'm looking at atm are:
1. Max drawdown (over the yr) - as a last resort circuit breaker (simple metric)
2. Expected expectancy Basically the idea being, we assume the expectancy of strategy remains constant, & plot the equity curve into the future. We then add 2 boundaries to this line (upper & lower i.e. +/-5%); & if the real p&l breaks the lower bound - the strategy gets turned off. I think that's faster than max drawdown; but I haven't done it yet
-
- Posts: 575
- Joined: Wed Apr 19, 2017 5:12 pm
- Location: Wolverhampton
^ This is what I've started to do with my equity curves! Completely agree this makes a lot of sense to detect whether something is below average quickly and needs turning off.
- ShaunWhite
- Posts: 9731
- Joined: Sat Sep 03, 2016 3:42 am
Plot your trend (TREND) and then plot the trend plus and minus the StdErr (STEYX)ruthlessimon wrote: ↑Tue Mar 19, 2019 6:03 pmBasically the idea being, we assume the expectancy of strategy remains constant, & plot the equity curve into the future. We then add 2 boundaries to this line (upper & lower i.e. +/-5%); & if the real p&l breaks the lower bound - the strategy gets turned off. I think that's faster than max drawdown; but I haven't done it yet
StdErr is a bit tight imo so you might want to tweak it a bit.
btw chart below is a coin toss, it took a few F9's to get a decent looking trend line example
I agree drawdown isn't a great measure, it doesn't take into account how far ahead you might have been. It just tells you how much bank you might expect to hand back. See below...a £14 DD at run#450 would kick you out while still above trend, but the same -£14 later at run#575 is more significant.
You do not have the required permissions to view the files attached to this post.