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Howard, how would you compare the correlation between the Edge Ratio of an entry indicator verse the overall expectancy of a system?


I understand that the expectancy of a system is largely a function of both entry and exit, while money management / position sizing are simply used to keep yourself in the game to exploit that expectancy and/or increase reward through increasing risk at the same time.




This is quite interesting as initially, I thought exit 4 and 5 was the best to minimise lost. But after further research and with my limited experience, I become more favourably biased toward exits caused by 1 and 2.


My "belief", yet untested, that the premature exit of an entry will degrade the whole system because you never left your winning trade to run its course because in "theory", they should have a higher probability of having a higher MFE.


That is, successful trades often rarely goes against you too far. And the use of trailing stops may limit risk, but will also limit potential returns that might reduce the overall performance of the system.


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