drawdown distribution.
Aggressive Systems Trading Drawdowns
- Thread starter Businessman
- Start date
Since I do not know the full statistical behaviour of the model, I can only comment on your model in general.
You need to at least work out the probability of the following to help yourself understand your model,
1. the probability that you will get X losers or more in N days.
2. based on #1, the expected drawdown for such an event.
If your system is showing you that you are encountering a 3 or higher sigma event, then your system is dead. The model is likely not built for the environment we are facing now.
e.g. #1 should be something that you should not encounter every 100 years and now you see it happen in live trading.
Good luck!
You need to at least work out the probability of the following to help yourself understand your model,
1. the probability that you will get X losers or more in N days.
2. based on #1, the expected drawdown for such an event.
If your system is showing you that you are encountering a 3 or higher sigma event, then your system is dead. The model is likely not built for the environment we are facing now.
e.g. #1 should be something that you should not encounter every 100 years and now you see it happen in live trading.
Good luck!
thanks for the thread, very interesting. I suffered a drawdown of 40% earlier in the year (and recovered) (This is for an extremely aggressive system). One thing that might be of note is the method of drawdown, ie when I looked at the top 10 drawdowns in backtesting, the rate of descent, the overall failure of the system was consistent. It helped me get through it. If it had veered way off, or the system started failing new REASONs would be cause for concern.
I hate resizing because often the best recovery from a DD is right after it (ie your system goes back in sync with the market).
of course, it could never go into sync. My personal rule of thumb for trading aggressive systems would be to stop after a loss of 150% of max DD.
so if your max dd is 40%, than you would lose up to 60%.
I hate resizing because often the best recovery from a DD is right after it (ie your system goes back in sync with the market).
of course, it could never go into sync. My personal rule of thumb for trading aggressive systems would be to stop after a loss of 150% of max DD.
so if your max dd is 40%, than you would lose up to 60%.
40%, 60% drawdowns???? Christ, I hope the returns on these systems are at least 300% a year!
I dont trade systems, unless the return is at lest 5X the max drawdown.
I dont trade systems, unless the return is at lest 5X the max drawdown.
Current drawdown: 29%.
Duration: 25 days.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1691797> </img>
Duration: 25 days.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1691797> </img>
Currently the Drawdown is 17% and has lasted 31 trading days.
My equity is now higher than when i started this thread a month ago, then i was down 19% and it was day 10.
Hopefully the low was in at 36% on day 19. But you never know what the future holds, another period of bad luck could see that equity low being taken out..
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1703681></img>
My equity is now higher than when i started this thread a month ago, then i was down 19% and it was day 10.
Hopefully the low was in at 36% on day 19. But you never know what the future holds, another period of bad luck could see that equity low being taken out..
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1703681></img>
Another winning day, nice to enjoy a winning streak again...
This drawdown is now 11%, and has lasted 32 trading days.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1705020></img>
This drawdown is now 11%, and has lasted 32 trading days.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1705020></img>