Re:NautilusTrader: Open-Source, High-Performance Algorithmic...
by mapontosevenths on Wednesday August 06, 2025 @03:29PM
(#44816563)
> your average win would only need to stay >1/199th of your average loss
You're not wrong, we're just talking about different things. You're talking about a hypothetical system that has a 99.5% win rate forever, and I'm talking about the way the market actually works.
In my version the market is often random, or to say it more accurately sometimes the Efficient Market Hypothesis is true and sometimes it's a Random Walk. His strategy likely worked during periods of stability when EMH held true. His strategy would have been 99.5% effective, until it suddenly started being no better than a random bet.
Of course he will have sized his stop loss for the times when his strategy was working, meaning he'll have placed it at something ludicrous like a 90% loss to maximize profit and avoid being taken out (anything else would have left profit on the table). This huge drawdown will suddenly wipe out almost all of his profits when the market shifts to random walk mode.
Even if he did size bets more reasonably, the length of time the market remains in random walk mode is itself random. Over a long enough time frame he'll eventually encounter random periods long enough to break him, even with more conservative sizing.
You're not wrong, we're just talking about different things. You're talking about a hypothetical system that has a 99.5% win rate forever, and I'm talking about the way the market actually works.
In my version the market is often random, or to say it more accurately sometimes the Efficient Market Hypothesis is true and sometimes it's a Random Walk. His strategy likely worked during periods of stability when EMH held true. His strategy would have been 99.5% effective, until it suddenly started being no better than a random bet.
Of course he will have sized his stop loss for the times when his strategy was working, meaning he'll have placed it at something ludicrous like a 90% loss to maximize profit and avoid being taken out (anything else would have left profit on the table). This huge drawdown will suddenly wipe out almost all of his profits when the market shifts to random walk mode.
Even if he did size bets more reasonably, the length of time the market remains in random walk mode is itself random. Over a long enough time frame he'll eventually encounter random periods long enough to break him, even with more conservative sizing.