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Expected Value / Statistical Variance / Monte Carlo Simulation Problem
Hi everyone. I am trying to figure out the expected value for a hypothetical stock market trading system. I don't know if this question falls under basic algebra, or statistic, or what, but here is are the inputs:
Total business (trading) days in a year: 252
Size of average profit: $2000 (10 times larger than the average loss)
Holding time / length of average winning trade: 3 days
Size of average loss: -$200
Holding time / length of average losing trade: 1 day
Total number of investable / tradable opportunities (entry signals) per year: 126
Percentage of trades that make a profit: 40%
Percentage of trades that incur a loss: 60%
What would be the expected value of such a trading system for every one-dollar put at risk?
And if you have time... is there an excel formula I can use to create a spreadsheet for the data (assuming we start with a balance of $10,000)?
ol! the stats are 100:1 reward to risk with a 40% prob of winninglucky you.
Expected Value = Prob(winning)*(Size of average win) - Prob(losing)*(size of average loss)
Yes there is an Excel formula you can use.
