First of all you start trading a system like that when it is experiencing a significant drawdown, but before you do even that you may want to do a Monte Carlo analysis to see what kind of drawdowns to expect. The past drawdowns can serve as some indication too. The MC analysis is widely used in these kind of problems and you will easily find pertinent resources on the web.
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Example Trading System
- Thread starter sidinuk
- Start date
First of all you start trading a system like that when it is experiencing a significant drawdown, but before you do even that you may want to do a Monte Carlo analysis to see what kind of drawdowns to expect. The past drawdowns can serve as some indication too. The MC analysis is widely used in these kind of problems and you will easily find pertinent resources on the web.
Quote from thomas_spinner:
I wonder what kind of money management can be applied to this type of strategy, i.e. time exits rather than specific price targets.
I have tried some pyramiding/scaling in techniques on this system and none seem to work. Maybe it is too short of a timeframe?
-thomas
Years ago I made a stab at that as well and as I recall the results were not encouraging. Perhaps you should contact 40 Y.O. Trader and see what you can pry out of him. He said the sizing algorithm was the secret of his system's apparent success. Personally, I am not comfortable adding size while in a drawdown.
No, indeed; neither am I. One worries that if at some point a market undergoes some subtle change as a result of which one's system no longer has its edge, a substantial drawdown is perhaps exactly what one will see in the first instance. Not a good time to be increasing stakes, perhaps.Quote from AAAintheBeltway:Personally, I am not comfortable adding size while in a drawdown.
Quote from AAAintheBeltway:
Years ago I made a stab at that as well and as I recall the results were not encouraging. Perhaps you should contact 40 Y.O. Trader and see what you can pry out of him. He said the sizing algorithm was the secret of his system's apparent success. Personally, I am not comfortable adding size while in a drawdown.
i was thinking about sizing during trades, not in between trades....
-thomas
I have now added the results of backtesting the original system on the e-mini S&P500, Nasdaq-100, Russell-2000 and S&P Midcap 400 futures. Trading results from different markets.
Quote from DT-waw:
Your system made 315 trades on ES during the 2 year period. With slippage 2 ticks and $5 commission per round turn the whole 10k profit is gone....
Systems like that require more volatile markets to produce real profits. That's why it works well for ER2 and not for ES. For YM it does OK, but YM is more volatile than ES or at least it used to be because things are changing...
Unless you are trading about a 1000 contracts you aren't going to see 2 ticks of slippage on every ES trade. But, your right the system needs volatility and ES and NQ have been very lacking in that for the last couple of years. Just goes to show the importance of diversification.
The system scored 3 wins out of 4 trades on the Dow last week. The Thursday rule once again kept us out of a losing trade. The daily breakdown can be found on my site.
The system scored 3 wins out of 4 trades on the Dow last week. The Thursday rule once again kept us out of a losing trade. The daily breakdown can be found on my site.
Hi sidinuk.
Just wanted to say thanks for sharing this info.
When I was reading through the building of this system a bell went off in my head in one speficic area that helped me adjust my current breakout system.
Just wanted to say thanks for sharing this info.
When I was reading through the building of this system a bell went off in my head in one speficic area that helped me adjust my current breakout system.