a question about equity drawdown

Discussion in 'Strategy Development' started by robinxing, Jun 27, 2007.

  1. I have setup a trend following system

    it performs well in the last 4 month in HSI

    usually it grasps about 800 points/per contract from HSI in a month

    average drawdown in a month never exceeds 400 points

    but in this month after it grasp about 600 points

    it begins to drawdown

    until now it has drawdown nearly 600 points in these two days

    I have examined the trade system

    in these two days for this system there is not much room for it to grasp profits

    I wonder should I modify the system or not?
     
  2. @Robinxing,

    you have to examine much historical time series data and additional monte carlo based simulations to estimate the possible drawdowns of your trading concepts.

    The principle of an optimized trading system development process I've published in an Trader's article this year:
    http://www.zentrader.de/mcs_article_traders2007.pdf

    bye,
    zentrader
     
  3. joesan

    joesan

    Have you been trading it with real money ?

    If yes, then stick with it.

    If no, then you need to modify the system,unless you are OK with a DD of 600 points in trading this symbol





     
  4. http://dictionary.reference.com/browse/confidence

    con·fi·dence
    noun 1. full trust; belief in the powers, trustworthiness, or reliability of a person or thing

    Confidence is not part of a mechanical trading system. Confidence comes from within. I think confidence is some kind of feeling or judgement. Your lack of confidence in your trading system may be a warning sign that you are not testing your method thoroughly enough. You might feel fear. I believe fear is a feeling that communicates "the possibility of loss" to other parts of my body and mind.

    Only you can know your feelings. You might want to spend time, both alone and with others, and feel and express your emotions. Analyzing feelings may be counterproductive but sensing the feelings may lead to awareness of something important to you.

    Can you identify an event in your life history when you remember feeling a lack of confidence? You might explore those memories and feelings. They might be important.

    I find the difficult part of my trading is the emotional up and down roller coaster ride. If I follow my system rules then my trading proceeds fine.

    I find it easier to trust my trading system when my choice of risk level is low.

    You might explore your feelings concerning the unknown and unknowable. Losing streaks in the nonexistent future can not be reliably predicted or known.

    <img src=http://drghetto.com/phunny/self_confidence.jpg \img>

    Confidence is internal.
     
  5. generally speaking ,

    I tend to think market has trend at specific time frame

    especially in short term

    so I setup serveral trend following system to grasp intraday trend

    but sometimes it is volatile to grasp trend with small stop

    so I have to increase the stop amount in order to avoiding being

    wiped out
     
  6. I can not believe it

    when I switch to minute chart

    the strategy performs better than with tick chart

    but in the last four monthes ,the strategy performed better with tick chart except this month
     
  7. tick chart
     
  8. minute chart
     
  9. joesan

    joesan

    Interesting charts, your tick chart and minute chart have almost same trading frequency, roughly 6 trades per trading day . If monthly profit is 650 points, divided by 130 trades per month, the average profit trade is 5 points. Have you include commision and slippage into the calculation and did actual trading result yield similar result to the theoretical equity curve in tradestation?
     
  10. sure I have include the 1 point commission and 2 point slippage/per trade
     
    #10     Jun 28, 2007