Draw-Down Analysis
- Thread starter J~Commisso
- Start date
OOPS!! Didn't notice how expensive that software is!!!
Thanks for the 'heads-up', but I am only managing one large account for one person (actually a corporation)... We will see how it goes...
PEACE and good-trading,
Commisso
Yo!
As a system/discretion trader...
1st thing to consider is your trading style. How much of your style, which I assume from past interactions is discretionary... are you willing to sacrfice? This becomes a large part of what you are going to do.
"Risk of Ruin", "Utility Thoery" and other Equity based analysis is in a way a limitation based on how you trade. You have a certain track performance... then you allocated XXX amount of risk per trade so that you don't go bust(Risk of Ruin), or you lessen your risk amount based on DD (Utility Theory) and etc. etc....
Honestly, there are some systems that work well without any well known equity analysis and there are some that do.
Also, considering you're a discretionary trader, there are some boundaries, too. Traders(generally, speaking of discretionary) have different ways of getting their mojo going... some perform well under pressure of getting out of DD... like a comeback kinda style. Some might be constantly consistant.... Depending on how you trade the techniques that you should implements changes.
Being both, I'll be more than glad to help...
Personally, you are one of the rare friends I met in ET and I wish you all the luck.
Also, you should talk to nitro, he's in vacation but most likely he can give the most insights, though he is not completely intuitive like you.
As a system/discretion trader...
1st thing to consider is your trading style. How much of your style, which I assume from past interactions is discretionary... are you willing to sacrfice? This becomes a large part of what you are going to do.
"Risk of Ruin", "Utility Thoery" and other Equity based analysis is in a way a limitation based on how you trade. You have a certain track performance... then you allocated XXX amount of risk per trade so that you don't go bust(Risk of Ruin), or you lessen your risk amount based on DD (Utility Theory) and etc. etc....
Honestly, there are some systems that work well without any well known equity analysis and there are some that do.
Also, considering you're a discretionary trader, there are some boundaries, too. Traders(generally, speaking of discretionary) have different ways of getting their mojo going... some perform well under pressure of getting out of DD... like a comeback kinda style. Some might be constantly consistant.... Depending on how you trade the techniques that you should implements changes.
Being both, I'll be more than glad to help...
Personally, you are one of the rare friends I met in ET and I wish you all the luck.
Also, you should talk to nitro, he's in vacation but most likely he can give the most insights, though he is not completely intuitive like you.
"Statistical analysis" of how badly you're losing your ass can only be done postmortem.
In one way you are right if you want to bring up that drawdown studies are very difficult to do on real trading systems. "Risk of ruin theory" is mostly helpful in allowing you to see what happens in carefully setup probabilistic models. Real life "systems"- I am not even talking of discretionary components - are almost impossible to setup for such rigorous analysis.
There is nothing "mis-focused" about learning a bit about all this. Did not Euripides say: "Luck fights on the side of the prudent".
Smart-assing for 35 years may be a stroke of luck. In fact this does not contradict Euripides, it is an event with nonzero probability. In all likelihood you are not talking about system-trading.