Relação de Lucro e Perda

Let's talk about what the profit-loss ratio is

When evaluating a trading system, I believe we should focus on one core key indicator, which is the "profit-loss ratio." The profit-loss ratio refers to the average profit amount divided by the average loss amount.

For example, if you invest 1 million yuan and trade 10 times according to a certain operating system, with 4 profitable trades of 150,000 yuan, 250,000 yuan, 350,000 yuan, and 450,000 yuan respectively; and 6 losing trades of 100,000 yuan, 150,000 yuan, 100,000 yuan, 50,000 yuan, 70,000 yuan, and 200,000 yuan. At this point, the average profit during profitable trades is 300,000 yuan, and the average loss during losing trades is 111,700 yuan, resulting in a profit-loss ratio of 30/11.17 ≈ 2.69. If you continue to trade using this trading system, whether it’s 100 times or 1000 times, theoretically, you can achieve a profit with a profit-loss ratio of 2.69. A profit-loss ratio below 1 indicates a loss.

However, when objectively evaluating, we need to consider certain redundancy factors. Personally, I believe that the profit-loss ratio should not be lower than 2. Specifically:

A profit-loss ratio of 3 can be considered passing, which is 70 points;

A profit-loss ratio of 4 can be considered good, which is 80 points;

A profit-loss ratio of 5 can be considered excellent, which is 90 points;

A trading system with a profit-loss ratio higher than 5 can be considered full marks.

It is important to note that trading systems with a profit-loss ratio higher than 5 are very rare. I suggest everyone calculate the profit-loss ratio of their long-term trading system (or trading rules) to better assess its effectiveness.

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