Profitability Evaluation
The second model produces about $330 gross from $100 over the out-of-sample period before fees. Sharpe ratio measures return per unit of volatility and should be annualized for strategy comparison. Trade log return is calculated by multipl…
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The second model produces about $330 gross from $100 over the out-of-sample period before fees. Sharpe ratio measures return per unit of volatility and should be annualized for strategy comparison. Trade log return is calculated by multiplying the model's directional signal by the closing log return. Log returns can be cumulatively summed over time to model compound growth. Win rate alone does not determine whether a trading model is profitable. Fees can make a grossly profitable taker strategy unprofitable.