I first read about the edge ratio in the Novel Method of The. The advantage the trading system's entry provides is quantified using this technique by measuring how the price behaves within a definite period of time, beginning from the moment the transaction is taken until a fixed point in time in the future.

Basically, when the entrance criteria is fulfilled the amount of pips the market moves in favour of the transaction is split by the amount of pips the market moves against the transaction from the moment the transaction is entered before the fixed point in time in the future. It's this amount that offers the entry's edge ratio.

If discovered that 80-day Donchian channels generated a border ratio of approximately 1.40 to 1 over 20 days and this produced a system that had a ratio of around 2.10 to 1 when it arrived into the machine's pips won to pips lost ratio. This was improved to 2.29 to 1 when used with an exit that also had an advantage.

The complete results are here http://www.myforexdot.org.uk/Measuri...stemsEdge.html

So what is you trading system's advantage and how do you measure it?