Expected Value / Statistical Variance / Monte Carlo Simulation Problem

• Feb 5th 2013, 09:48 PM
MathIzHard
Expected Value / Statistical Variance / Monte Carlo Simulation Problem
Hi, I am a first time poster. I am trying to figure out the expected value for a hypothetical stock market trading system. I don't know if this question falls under basic algebra, or statistic, or what, but here is are the inputs:

Size of average profit: \$2020 (10 times larger than the average loss)
Holding time / length of average winning trade: 3 days
Size of average loss: -\$20
Holding time / length of average losing trade: 1 day
Total number of investable / tradable opportunities (entry signals) per year: 126
Percentage of trades that make a profit: 40%
Percentage of trades that incur a loss: 60%

Extra info:
All profits are reinvested seeking compound growth.
Total risk per trade: 3% of total capital (adjusted constantly to remain at 3%).

What would be the expected value of such a trading system for every one-dollar put at risk?

And if you have time... is there an excel formula I can use to create a spreadsheet for the data (assuming we start with a balance of \$10,000)?

Thanks!