What constitutes edge / why is my system working?

Discussion in 'Trading' started by radiusvector, Dec 28, 2017.

  1. JamesEM


    LMAO! I'm a "parasitic trader"!!!
    #51     Dec 30, 2017
  2. I think your 35% drawdown is the key. It's one thing on a backtest where you see the P&L curve come back up a few weeks/months later. It's one thing on a 10k gambling money account. Now imagine you have all your life savings there. Can you wear 35% and not stop your system / change its parameters? My guess is most of us will panic and get out at the low point.

    So my advice would be - think about how much you are comfortable losing, divide that number by 2 and solve for your system max historical drawdown before trading - because trust me, your actual max drawdown will be closer to 2x the historical one!

    On a brighter note - these drawdowns are the reason no institutional money can follow these strategies, and why they're viable for retail investors / not arbitraged away. Good luck!
    #52     Dec 30, 2017
    Digidave10 likes this.
  3. Great advice. At this point, I'm starting small. Very small. $100 on my live trading account, primarily to make sure that the trade structure/entries/exits/winrates and other metrics stack up close to the backtest. I don't expect them to match 100%, but I'm looking for atleast a 95% confirmation which would give me the confidence to add to the account. Above that, good point on the emotional side of that loss - losing 35% of x is different for different people, and I'll need to figure out where I put that x.

    Here's to a brilliant 2018 of learning, and maybe profit!
    #53     Dec 30, 2017
    alex314159 and lawrence-lugar like this.
  4. ironchef


    Very impressive returns. The 10 yr SPY had a worst drawdown than yours. You may have discovered an excellent system.

    Good luck.
    #54     Dec 31, 2017
  5. Hello qxr1011,

    Can you please elaborate why you say F Ernest Chan? Is he not well respected teacher in the automated trading arena?

    #55     Jan 3, 2018