Markets: A Rigorous Course

M04 · Problem 8 ★ Check

Breakeven win rate with Indian costs and gaps

An O'Neil-style system cuts losses at 8% and takes profits at 20%. Round-trip statutory and broker costs are 0.238% (Worked example 4.3) and slippage is 0.25% per side. (a) Express costs in RR and compute the breakeven win rate. (b) Gaps through the stop make the average loss 1.2R1.2R. Generalise (4.5) to an average loss of LRLR and recompute p∗p^*. (c) At a 35% win rate, what is the expectancy per trade in RR under (b)?

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