Sounds like it was just your discipline then, and not some problem inherent in your method. Solution is to work on your discipline. Try to devise a way to avoid this thing happening again. Read trader books to get a better handle on the psychology issue.
1. There is no "acceptable range" or "maximum expected" on drawdowns. You could go several years with small drawdowns, then catch the wrong set of circumstances to take a big hit. 2. Only thing you can do for SURE is to eliminate the possibility of a large loss on one trade. Decide early on how much you need/want to risk and place a stop order there. Though you will sometimes get stopped out on trades where had you risked a little more the market would have saved your bacon, at least you stop out of a potentially big hit before it has the chance to snowball. It's much better to lose 50 points on 10 stopped out trades than to lose 50 points trying to "save" when the market is going against you. (And you already know deep down, that if you make a habit of removing your stops or averaging into losers, .... even if you "got away with it" before... it's just a matter of time before the market nails you BIG, right?)
The basic formula for determining the outcome of a trade is: Outcome = Mean + (Zscore * Std. Dev.) To find the max. DD all you do is load up all the trades for the test and measure peak to valley equity for each pass. For this tool, 10,000 runs of 120 trades each were done. No Monte Carlo work was used for this. The value of the tool is that it lets you know the expected range of outcomes for the system. In my experience, it accurately measures the outcomes going forward as long as you adjust for market volatility.
Thank you very much acrary. Very good to hear from you. How do you generate the 10,000 runs of 120 trades? Do you have a special program that creates a random series order from your actual trades for each run? good trading, Allan
In your example, what do the levels represent? (1% level, 5% level, etc.)? If you are simulating the trade series order, are these levels simulating higher and lower win/loss accuracies? Since you are using 10,000 runs or 120 trades, are the outcome, profit factor and drawdown numbers for each level averages or? thanks and good trading , Allan
i can hardly believe this figure. ten to one is very, very high. i doubt that this is possible using daily data without intraday activity. peace
I'll start a Journal called "System Development" to discuss these kinds of topics. I don't want to continue off topic in other people's threads.