Thanks all for you reply, indeed it seems that warning people about the high leverage is the only solution if they are not able to put more capital.
Quote from Superman MMX:
You must have meant deleveraging.
Agree, my mistake. I should have written, re-design the system.
The point I am making is that if a system trades one ES per 200K, in my opinion it is a very poor system.
I don't want to re-design the system, as the system is good as it is...
Even if that $200K example was to make the explanation simple, let's say it's the truth. I do have a system trading ES (and some other markets (bonds/currencies) with the same parameters) with an historical DD of ~$20K on 14 years of test. The system is taking swing positions.
The avg win and loss are around $700 with a %win of 58%. For me it's a good system... (see equity curve) if I want to respect some risk parameters and potential future DD of ~40K where I may start thinking to stop the strategy (double the historical DD, if I don't want to bother with monte carlo simulation), I think that $200K is a minimum... (allows for a 20% DD before stopping).
Unfortunately often due to the lake of capital people on forums try to find systems with 4 ticks stop... and never go anywhere. The same goes for their discretionary trading.
Also for that $200K you may want to trade 1 lot ES, 1 lot of 10Y, 1 lot of coffee.. etc. you will have a diversified good overall system... but still the problem of scalability.
I'm interested to know how you define what is a good or poor system?