It's fine to be confident about what can handle but you're really shooting yourself in the foot when you endure 20-50% drawdowns which, with a 50% win rate risking 5%, will guarantee this being a regular occurrence. This is because of that nasty thing called asymmetrical leverage.
The system has been carefully designed so that the effects of asymmetrical leverage cause only a moderate degradation in overall returns.
makes sense.. that is why his drawdown was always at a maximum of 30% through the backtesting... we were in a bull market. Classic case of murphy's law....
It is a long/short system that trades stock index futures aswell as currencies and commodities. The 30% figure was for 95% confidence, 5% of drawdowns will exceed 30%, the largest drawdowns from back testing exceed 50%.
Since i last posted the drawdown has increased to 36%. The last three days were all losers. This drawdown has lasted 19 days so far. There have been only 3 winning days in the last 15 days. <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1682356></img>