Quote from Murray Ruggiero:
You need to ask a more important question. Not if the system no longer works but was it ever robust. Things like turning a system off because the drawdown doubles/Triples over a relatively short timeframe is a function of curve fitting.
First drawdown of a system should increase with the square root of time. I could expect a system which has not been reoptimized to have double or triple it's original drawdown over 10 years after release.
If a system is robust and you understand it's premise then you stop trading it when the premise changes. For example Index systems buying the dips worked from the 1980's though 1999, except for a few periods that increase drawdown.
Let's look at this this buy the dip premise. During this period this premise was valid , the market remained above the 200 day MA most of the time, except for nine months in 1987 , we never spend more than a month or two below the 200 day moving average. Starting from 9/2000 to 4/2003 we were only above the 200 day moving average for a few weeks. this to me means that we can just stop trading a buy the dip system when we remain under the 200 day moving average for more than several months because the premise has changed. This would of turn the system off in 1987-1988 crash and from 1/2001 till 4/2003. We also would of turned the system off from 3/2008 until October 2009.
I am not saying this is a great system but an example of a system based on a premise which we can turn on and off and know when our premise is no longer valid, either right now or longer term. After the 2000-2002 lessons we might even added a 200 day moving average turnoff to this strategy.
