what the hell happened!?!?

I haven't done Monte Carlo so I can't advise on that, but an alternative approach is to try to mitigate the extent of the worst drawdown. This can be done through equity curve timing (for example scale back or stop trading when your equity curve is below it's moving average) or simply reducing your exposure as you enter an excessive drawdown. The latter approach is highly recommended in the book Trading Risk by Kenneth Grant. It's all about controlling portfolio risk by a professional risk manager.

I'll tell you up front that scaling back in a drawdown is not the way to achieve the highest returns. More likely than not it will hurt your returns, but it can help you avoid a very significant drawdown and that is more important.

 

Go back in the thread, I posted lately 1 spreadsheet to do the bucketing from your backtesting results, and in the beginning 1 spreadsheet for MonteCarlo sim using YASAI.

As an alternate, post all you trade results (backtest + live) here, 1 trade per line, and I will do the bucketing & MonteCarlo sim for you (will post the 2 spreadheets updated with your data). In that case, let me know the average number of trades per year, as I always do ! sim for the total number of trades in the history, and 1 sim for 1 year worth of trading.

 

if i did it right, my worst drawdown is supposed to be 48.25 points :O

operative word being *if

 

ok dom993 i did it your way. however, i am lookin for a distribution of possible worst drawdowns and all im getting right now is a single value. i tried runnin yasai simulation on it but came up empty. am i doing something wrong or is it not possible with your setup?

 

Of course I cannot tell what you are doing wrong for I have no clue re. what you are doing ... please post your spreadsheets, or list all trades outcome so that I can do something useful for your at my end

 

Column K:
-5
5
2
3
4

Column L:
50%
10%
10%
10%
20%

Column C:
Line 1: 0
Line 2: =genTable(K$1:K$5, L$1:L$5)
Line 3: =genTable(K$1:K$5, L$1:L$5)
.
.
.
Line 100: =genTable(K$1:K$5, L$1:L$5)

Column D:
Line 1: 0
Line 2: =SUM(C$2:C2)
Line 3: =SUM(C$2:C3)
Line 4: =SUM(C$2:C4)
.
.
.
Line 100: =SUM(C$2:C100)

Column E:
Line 1: 0
Line 2: =MIN(E1,-(MAX(D$1: D2)-D2))
Line 3: =MIN(E2,-(MAX(D$1: D3)-D3))
Line 4: =MIN(E3,-(MAX(D$1: D4)-D4))
.
.
.
Line 100: =MIN(E99,-(MAX(D$1: D100)-D100))

 

Something is wrong with the logic of your model. Something is wrong with the logic of your model. Something is wrong with the logic of your model.

Would be nice to know

What you are trading?
Frequency of trade?
Size of trade?
Logic of system?
How fast was the draw down?

All the sims in the world will not fixed a system with inconsistencies.

If you can't figure out how/why you lost a lot of money - quickly - don't trade.

 

I don't agree. Firstly, philosophy is the most practical subject on earth, because it is the study of the nature of reality, what is factually correct, the foundations of knowledge and so on. There is a reason why philosophy led eventually to science, which is the best tool humans have ever constructed for understanding reality.

Secondly, every profitable trader is making decisions based on his analysis of how markets acted in the past, and his assumptions as to how they will continue to behave similarly in some ways in the future. Since you cannot see into the future, there is literally *nothing* to base any decisions on except the past. All decision-making based on reason is based on analysis or experience of past events, not future ones.

The question is not whether the past is indicative of the future, but in what ways, and under what limitations. What underlying market truths (i.e. cause-effect relationships) can we come up with based on past behaviour, as opposed to stuff that was just random noise, coincidence, spurious correlation and so on.

 

But there are lasting inefficiencies based on fundamental human psychological traits such as emotional decision-making, extrapolation of the near-past into the future, conformity, loss-aversion, and so on. Those traits cause predictable patterns of behaviour to emerge, and until human nature changes, speculators who are able to act rationally and independently will continue to see opportunities to profit.

 

I was watching Through the Wormhole last night. Mathmeticians have proved time doesn't exist. But another scientist claimed, "They just think it doesn't exist because they don't realize math is also changing."