No, I was mistaken. SQN does not incorporate drawdown. I have made a query to Van Tharp as follows:
> I have some information stating that SQN, as applied to financial > products, does not include drawdown during a trade. In fact the formula > that I have seen is: > > SQN = Net Profit / Standard Deviation of Returns / Square Root of the > number of trades > This would indeed take into account the negative trades, but not the worst > drawdowns during trades. > Is this correct? > This I got as an answer: > You have a formula for the SQN which is similar to but is not Van’s > formula. Van developed the idea for the SQN score as an effective way to > help traders craft position sizing strategies for their trading systems. > It is trademarked and considered proprietary for our clients. We teach the > formula and its application in our Blueprint workshop, in our Systems > Development workshop, and Van wrote about it in the Definitive Guide to > Position sizing strategies. > > You are correct that the SQN score does not consider the “maximum adverse > excursion” (MAE) of price in the trade as it’s commonly known. If you are > following Van’s Tharp Think principles, however, your MAE should never be > much more than -1R except in the cases of opening gaps or limit moves where > the MAE will equal the exit point as well. While MAE and the SQN score > both tell traders something about the performance of their systems, they > have different purposes. > RJ Hixson > The Van Tharp Institute > > So JBookTrader's PI is not exactly SQN but this is unimportant as drawdown is not part of SQN anyway. I'm looking forward to the implementation of "Average Profit to Drawdown (APD)". Eugene, where can I find the formula for this? I have seen a discussion about APD on the Collective2 site but actually not found the formula itself. -- You received this message because you are subscribed to the Google Groups "JBookTrader" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send email to [email protected]. Visit this group at http://groups.google.com/group/jbooktrader. For more options, visit https://groups.google.com/groups/opt_out.
