From 6bb045f5655959c01455d4a886ac6485f17e354b Mon Sep 17 00:00:00 2001 From: Matthias Date: Thu, 8 Oct 2020 08:30:30 +0200 Subject: [PATCH] Simplify stoploss calculation --- docs/edge.md | 6 +++--- 1 file changed, 3 insertions(+), 3 deletions(-) diff --git a/docs/edge.md b/docs/edge.md index 0891a851e..d3a6af8ba 100644 --- a/docs/edge.md +++ b/docs/edge.md @@ -94,11 +94,11 @@ $$ R = \frac{\text{potential_profit}}{\text{potential_loss}} $$ Since the price might go to $0, the $100 dollars invested could turn into 0. - We do however use a stoploss of 15% - so in the worst case, we'll sell 15% below entry price (or at 8.5). + We do however use a stoploss of 15% - so in the worst case, we'll sell 15% below entry price (or at 8.5$). $\begin{aligned} \text{potential_loss} &= (\text{entry_price} - \text{stoploss}) * \text{investment} \\ - &= (10 - (10 * (1 - 0.15))) * 100\\ + &= (10 - 8.5) * 100\\ &= 150 \end{aligned}$ @@ -108,7 +108,7 @@ $$ R = \frac{\text{potential_profit}}{\text{potential_loss}} $$ &= \frac{500}{150}\\ &= 3.33 \end{aligned}$
- What it effectively means is that the strategy have the potential to make 3$ for each $1 invested. + What it effectively means is that the strategy have the potential to make 3.33$ for each $1 invested. On a long horizon, that is, on many trades, we can calculate the risk reward by dividing the strategy' average profit on winning trades by the strategy' average loss on losing trades. We can calculate the average profit, $\mu_{win}$, as follows: