MT4 Tracker computes “linearity” charts for both the “BEFORE” and “AFTER” portfolio balance charts. How one interprets a portfolio’s balance chart is somewhat subjective, though we do place importance on linearity as a measure of robustness. The reason for this is because in the absence of being able to predict the future, a balance chart that exhibits a linear pattern over its first 200 trades gives us some confidence future trades will continue the pattern.

‘Robustness’ is an elusive property that is highly desirable in all trading systems. It refers to how a particular strategy (or portfolio of strategies) performs over a period of time that includes many trading transactions. A robust strategy is one whose performance is consistent and doesn’t vary. A portfolio that includes a diverse collection of EAs has an advantage over a single EA in terms of its ability to trade in a consistent, robust manner.

From a statistical point of view, one could claim that a linear balance chart infers the portfolio trades in a robust manner. The “Before” and “After” linearity charts allow you to compare portfolio performance before and after pruning poor-performing strategies. R-squared is a statistical measure of how close the data are to a fitted, regression line. Roughly, it is the percentage of data points that contribute to a linear, fitted curve. And if linearity can be considered a measure of robustness, then R-Squared provides a valuable metric by which we can compare one balance chart with another.

**Articles of interest:**

Regression analysis and interpreting R-squared and Goodness-Of-Fit.

Multi-Market techniques for robust trading strategies.

Monte Carlo approach to stress-test a trading strategy.