This where all these systems (based on historical data) fail miserably. Who in there right mind could handle a drawdown like that based upon past performance? NOBODY ! Why ? Because they can not predict the future. Watch out ET I see another vendor on the horizon. That's what all these guys do!
Avalanche, that drawdown translates to less than 30% of capital traded at that time, and for me that is acceptable. (please take a look at the equity curve of the second system results I uploaded expressed in logarithmic scale, in which rise or decline is expressed in percentages...you will see that it seems much normal when viewed in relative terms). No %Equity is not set to 15%, position sizing is done by a simuscript ( wld code for position sizing). But to answer your question, the script does trade %equity, but different size depending on the signal (long or short). I defined it based on portfolio size and maximum number of open trades at one time in the past...I wanted to be able to take more than 90% of signaled trades because the equity curve gets erratic if I take too little of the trades that are signaled. Equity goes vertical in 2003 only because it was expessed in absolute terms, in relative terms (% return) remains more or less steady. Equity curve in in 2003 behaves the same as in 1999, just the rise is a little less steep in 2003. Notice that in 2000-2002 exposure (light green) significantly drops( there is more dark green, which is cash on account) as long strategy is put on hold by a system itself (it kinda protects itself from unfavorable market conditions), and that most of the exposure comes from short trades(short strategy is based on totally different concept than the long). That is why the equity doesn't decline like in the other pullback buyers. P.S. I uploaded the equity from second sys results rather than first because there is no that freak drawdown from short trades in 2001 so it is more representative of the points above, in all other respects is almost the same as the other one, I you want I can upload it too...
Samson, be rest assured I am not selling anything. I just wanted some opinions because I'm planning to begin trading it next week...
maos, Concerning your last equity curve, It is quite troubling to see that buy and hold (the blue line) from March of 1999 to the the end of 2000 outperformed your system... Or am I reading the blue line wrong..its hard to see the color code on my laptop after zoom?... Michael B.
ah, that looks better; still some long periods between new equity highs. I can say from my own system trading, those can wear on you. m
You may wish to consider: 1) Reducing slippage to 1c - you can get VWAP for 1c as an institution (although this does have some slippage in it as well) - as an individual with 100-300 shares, you should be able to enter positions with less than 1c slippage if you do smart order-entry, or use the opening auction on the NYSE for very low slippage. 2) Relaxing the constraints or slightly changing the logic so that you always invested in x% of stocks. If this crushes your system it is a bad sign. It is worrysome to me that your system frequently goes to cash, and that this is related to market movements. Macro timing is a very tricky thing since you have so few data points. I also strongly suggest that for your entire development of future projects you test using a walk-forward algorithm for some time period that excludes the past year. After you are finished the system, then test it on the last year as a reality check. Everything said, your test results remain fairly impressive. Best of luck with implementation.
In Wealth-Lab the Buy&Hold blue line represents buying the same amount of every stock which with a watchlist of over 100 stocks does not equate to to trading 10% equity. So I would not be concerned if you dont beat it.