I have come across this term before... But I am not so sure even after reading the definition. I am not so clear...
Almost all the definition and examples talks about just one single trade/investment where as pay off ratio is simple system's avg profit divided by avg loss. Probably this is the difference.
Someone who knows 'em exactly can help us clear this doubt...
Hello,
Risk Reward Ratio=R/R calculated for Single Trade.
Average Risk Reward Ratio=Payoff Ratio.(over "n" of Trades).
Risk of Ruin=Max system drawdown when ur equity becomes Zero...at particular % of Risk.(In a sample of at Least 100 trades....over "n" of Simulated Distributions...again depend upon win%....and "n" not less than 100 simulations ...This is Purely my defination on ROR...in books like Nac has read is different,i think its BENNETT Written book).
In my opinion for Calculation of System Performance......There is No Software Available for Public Use.
All backtesting Softwares which are Available Now are waste/no use .....
the only reason is distribution of sample data and uneven R/R for every Trade..we don't no what we are going to get until we close the Trade.
Backtesting only gives performance on a Sample of data for only One Distribution.
Regards,