R Squared of a Trading System Equity Curve

The coefficient of determination or R2 is used in the context of statistical models whose main purpose is the prediction of future outcomes based on other related information.

R2 value is a number between 0 and 1 and it describes how well a regression line fits a set of data.
When R2 value is near 1, this indicates that the regression line fits the data very well, while a R2 value near 0, indicates that the regression line does not fit the data at all.

This money management script calculates the R Squared of the trading system equity curve. It does so by creating the equity line time series then calculating the R Squared value of that time series on the "OnEndSimulation" event.

The R Squared or R2 value is stored under the "Statistics" tab of the simulation report.

The higher the R2 value the better the trading system equity curve. A very high R2 value should result in a profitable trading system with little drawdown.

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