I have a system which is always-in (long or short), and currently makes directional bets upon a specific timing signal. The direction of the bet results from statistical analysis of price action after said timing signal. So this system has no stop, it can only reverse a bad position at the next timing signal, and only based on statistical analysis (the decision ignores the current position). Of course, having no stop can lead to pretty large losing trades, and even though this is all fine in backtesting, it feels scary & devastating in actual trading. I have tried various techniques to limit that exposure to large losses (stop, stop & reverse, of course varying the size of that stop), but to date I have not found any technique to reduce that exposure without significant impact on the P&L (from -20% to -50%), and sadly in all cases the actual max historical drawdown ends-up larger than w/o any stop. I would appreciate any suggestion Thanks in advance
Run as many contracts simultaneously as possible and (eventually) as well dynamically hedge the underlying market.