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Drawdown on account?
- Thread starter EqtTrdr
- Start date
Quote from EqtTrdr:
the reason for the drawdown is obvious to me...lol
removed my stops and was "hope trading", got the old "deer in the headlights look" and kept doubling up on the losers....
thanks for all the input!!
1. There is no "acceptable range" or "maximum expected" on drawdowns. You could go several years with small drawdowns, then catch the wrong set of circumstances to take a big hit.
2. Only thing you can do for SURE is to eliminate the possibility of a large loss on one trade. Decide early on how much you need/want to risk and place a stop order there. Though you will sometimes get stopped out on trades where had you risked a little more the market would have saved your bacon, at least you stop out of a potentially big hit before it has the chance to snowball.
It's much better to lose 50 points on 10 stopped out trades than to lose 50 points trying to "save" when the market is going against you. (And you already know deep down, that if you make a habit of removing your stops or averaging into losers, .... even if you "got away with it" before... it's just a matter of time before the market nails you BIG, right?)
Quote from CharlesXT:
What is the formula you use to calculate the drawdown from these variables?
Do you use the "Monte Carlo drawdown optimization" or some other comparison against randomness for the drawdowns, in the same way that you compare your trades to randomness to check for an "Edge?"
(Wow, post number 30 for me. I'm moving up in the world. Not a junior member anymore LOL!)
Allan
The basic formula for determining the outcome of a trade is:
Outcome = Mean + (Zscore * Std. Dev.)
To find the max. DD all you do is load up all the trades for the test and measure peak to valley equity for each pass.
For this tool, 10,000 runs of 120 trades each were done. No Monte Carlo work was used for this.
The value of the tool is that it lets you know the expected range of outcomes for the system. In my experience, it accurately measures the outcomes going forward as long as you adjust for market volatility.
Quote from acrary:
The basic formula for determining the outcome of a trade is:
Outcome = Mean + (Zscore * Std. Dev.)
To find the max. DD all you do is load up all the trades for the test and measure peak to valley equity for each pass.
For this tool, 10,000 runs of 120 trades each were done. No Monte Carlo work was used for this.
The value of the tool is that it lets you know the expected range of outcomes for the system. In my experience, it accurately measures the outcomes going forward as long as you adjust for market volatility.
Thank you very much acrary. Very good to hear from you. How do you generate the 10,000 runs of 120 trades? Do you have a special program that creates a random series order from your actual trades for each run?
good trading,
Allan
Quote from acrary:
Here's a example using my prod5 for one year of expected trades for 1 SP contract.
In your example, what do the levels represent? (1% level, 5% level, etc.)?
If you are simulating the trade series order, are these levels simulating higher and lower win/loss accuracies?
Since you are using 10,000 runs or 120 trades, are the outcome, profit factor and drawdown numbers for each level averages or?
thanks and good trading ,
Allan
Quote from acrary:
For my trading I require a 10:1 ratio (annual profits to max. drawdown) and wouldn't trade anything that had more than a 10% max drawdown expectation.
i can hardly believe this figure. ten to one is very, very high. i doubt that this is possible using daily data without intraday activity.
peace
Quote from acrary:
The basic formula for determining the outcome of a trade is:
Outcome = Mean + (Zscore * Std. Dev.)
To find the max. DD all you do is load up all the trades for the test and measure peak to valley equity for each pass.
For this tool, 10,000 runs of 120 trades each were done. No Monte Carlo work was used for this.
The value of the tool is that it lets you know the expected range of outcomes for the system. In my experience, it accurately measures the outcomes going forward as long as you adjust for market volatility.
i do not understand why this is not a monte carlo simulation.