I have listened to an old seminar that touted trading on the equity curve. When I backtest my systems, I am not getting good results with this. However, the promise of what this technique can do, is very enticing. For me, the magic would be able to refrain from trading systems that are not doing well and only trading them when they are working. However, my back testing results are not promising. What is your experience with this? Thank you, Larry
Do not make trading systems and complicated strategies on the equity curve. That does not work is my experience. You cannot filter out too much here anyway. Just reduce your position size for the next trades when you make losses and scale in more or increase your size when you made some gains. That is natural and completely sufficient to get the equity curve smoothed.
%% Generally, no; certain exceptions would include=if your equity trend was somewhat like or partly 10 years of data of what your trading or investing. Thats good, mostly. And if you have special interest like something+ have made good money in it, short term; + you like the equity trend so far so good / but you see something on 3 years worth of data you dont like, still /so far so good. But your equity trend in that one market goes against you one day 7%,which is more than you figured. I would for sure average trade that one smaller. IBD allows 8% stop ,so 7 or 8% cash loss could be OK. I like to measure a lot....... peak to valley ,your equity trend+ childhood patterns; Betty noted in her child good she liked the smell of gasoline, so really have to factor all measurements in. NOT likely to find any magic , probabilities wisdom + experience may help.....................
So Doing trend analysis on a trading strategy. I wonder what @globalarbtrader thinks. It feels like doing an encryption on an encryption which yields just another encryption of the same strength as the first encryption.
%% Good link; but its by an ex market maker, so it included ''skipping trades after consecutive wins''. Good link. AND that trend[green start trading center circle again] is why we are generally negative on trading equity curve. Him,being an ex market maker, not even sure if he meant to meant ''green start trading again'' especially if one starts seeing reversals around one tic past center of red or green circle center. No trend follower would skip trades after consecutive wins. IFI had a wife like Dave Ramsey+ Sharon puts 00.25 in cruize ship slot machine against my wishes\LOL; + wins $120 against my wishes\ I would ask her to loan me $60 or $80, that way she may not lose $600 =true story. NOT that gambling is trading =its not
Seems like asking for the impossible, like avoiding drawdowns. When you invest or trade in the stockmarket, you will have losses. So, how to avoid losses? Stop trading. You will not have drawdowns but, will not make monies either. If you are in the stockmarket, you will suffer losses at some point. The only thing that matters is you have small losses and large gains, several times the size of the losses.
Do any traders have experience either trading the equity curve, or back testing this? On several of the strategies I have tested, my back testing has produced dismal results in testing.
I have lot of experience as I coded a lot here with moving averages and genetic programming approach and so on. Forget it. You easily get overoptimized results which are not good going forward. As I said already reduce size after a loss and increase after gain(s). That's it. There is no magic trading the equity curve because you basically can filter out all bad trades until you get it too optimized with a "dreaming", "fantastic" curve. It is not worth the effort. My experience.