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I DON'T TRACK MY SIGNALS THAT WAY

The average return is dependant on the use of leverage, which is an important issue that separate and apart from the information content of the signal upon which a strategy is based. Profit factor tells us about the information content of the signal.

One can have a signal with PF = 1.88 and use no leverage and get a return of X and use that same signal to get 2X just by increasing leverage. What you should have asked is about the risk-adjusted return.

What I am willing to share, and you are free to compute it yourself if your review my past posts, is the PF (profit factor).

A signal with good information is a necessary but not sufficient condition for producing profits. That's where leverage comes in. Even with a PF = 2.0, which is very high, one can wind up losing money by using excessive leverage. This topic is covered in a book called Fortune's Formula. It's about the Kelly Criterion. Kelly C tells you, for a given signal, the leverage to use to maximize total final wealth. Using leverage > Kelly C will increase the probability of losing all trading capital without increasing total final wealth. It's a book worth reading.

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