A trading idea...

xelite777

xelite777

Trader X has 10 back-tested and profitable trading systems. He knows the average and maximum drawdown of each system.

He start paper-trading each system with live data and when one of the system reaches the average (or maximum) drawdown, he trades that particular system with real money, virtually avoiding any further drawdown.

What do you think? :cool:
 
Quote from xelite777:

Trader X has 10 back-tested and profitable trading systems. He knows the average and maximum drawdown of each system.

He start paper-trading each system with live data and when one of the system reaches the average (or maximum) drawdown, he trades that particular system with real money, virtually avoiding any further drawdown.

What do you think? :cool:
More...

Flawed logic.
 
Quote from xelite777:

Trader X has 10 back-tested and profitable trading systems. He knows the average and maximum drawdown of each system.

He start paper-trading each system with live data and when one of the system reaches the average (or maximum) drawdown, he trades that particular system with real money, virtually avoiding any further drawdown.

What do you think? :cool:
More...

If the maximum was 20%, it's likely that when he starts at 20% DD it'll go to 25% or even more.
 
Quote from d08:

If the maximum was 20%, it's likely that when he starts at 20% DD it'll go to 25% or even more.
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Why?

Do you have any supporting evidence to back up his statement D08?

Thanks for your input.
 
Quote from xelite777:

Trader X has 10 back-tested and profitable trading systems. He knows the average and maximum drawdown of each system.

He start paper-trading each system with live data and when one of the system reaches the average (or maximum) drawdown, he trades that particular system with real money, virtually avoiding any further drawdown.

What do you think? :cool:
More...

Flawed because markets are "forever" changing. Simply, too many new variables arises multiple times per year that impact market conditions.

Another way to look at it (assuming we're not talking about automation trading)...traders that are consistently profitable from year to year is because of their ability to adapt to those new variables.

In addition, there's more to profitable trading than just trade signals. This is something newbie traders have an extreme difficult time in understanding because they're too fixated on trade signals.
 
Quote from wrbtrader:

Flawed because markets are "forever" changing. Simply, too many new variables arises multiple times per year that impact market conditions.
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Sorry but markets do NOT change over the years, they go up, they go down and they go sideways, that's all they have been doing since day one, open any chart (even a 100 year old chart from the US stock market) and see for yourself.

Sure, some years are more volatile than others, but we all know that already.

Quote from wrbtrader:Another way to look at it, assuming we're not talking about automation trading...traders that are consistently profitable from year to year is because of their ability to adapt to those new variables.
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Quite the contrary, I can show you trading systems that are still profitable 30 years after their creation, using the same exact simple trading rules on 30 different commodities.
 
Quote from xelite777:

Trader X has 10 back-tested and profitable trading systems. He knows the average and maximum drawdown of each system.

He start paper-trading each system with live data and when one of the system reaches the average (or maximum) drawdown, he trades that particular system with real money, virtually avoiding any further drawdown.

What do you think? :cool:
More...
People who obsess over drawdowns are risk-averse. IMO risk-averse people make poor traders. Trading is inherently risky and it favors the risk-seeking and the risk-neutral. JMO

The goal should be to maximize net-profits, not minimize losses. Profit maximization will involve some risk reduction but the only way to eliminate risk is to not trade at all
 
Quote from kut2k2:

People who obsess over drawdowns are risk-averse. IMO risk-averse people make poor traders. Trading is inherently risky and it favors the risk-seeking and the risk-neutral. JMO
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A poor opinion imo
 
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