Defensive Money Management Explained: How to Evaluate a Trading Strategy (or Your Edge) Objectively

By Lawrence

One of the fundamental questions that we have to ask ourselves when we see a profitable trading strategy is that whether the strategy will reform well in the future. All kinds of testing are invented from walk-forward testing to Monte Carlo simulation for the sake of giving us an idea how good (or bad) the strategy will possibly do. I have a different take on this subject and I think it is a very good idea to share it here.

Note: This article is very long and some basic understanding of statistics is required


  • System Performance Should be Measured Relatively
  • Statistics Based Performance Benchmark
  • Case Study: Emini S&P Daily Statistics and Their Implications
  • If Your Strategy is Really Doing Anything Meaningful, It Should Beat the Benchmark
  • Year to Year Relative Performance Key Metric on Consistency
  • Adapting the Technique on Higher Resolution Trading Strategies
  • More Thoughts on Short Side Trading Strategies on Emini S&P During This Mega Bull Run


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