Thoughts on Bracket Asymmetry

• bracket asymmetry does not change the expected reward of a trade, it only changes the frequency of your wins & losses. In a random process a symmetric bracket will produce 50/50 loss/win with equal amounts. Asymmetric bracket 80/20 will give you wins 80% of the time and losses the other 20%, but your average loss will be 4x larger than your average win, giving you the same expected reward of 0.
• At this moment I keep brackets symmetric to reduce complexity.
• bracket width is very important: set it too low and you only get 'market noise', set it too high and neither level will be hit. I generally use a vol estimation to adjust for bracket width.

Written by Jev Kuznetsov. Jev is a physicist who trades and develops trading algorithms.