High Risk High Reward Trading

[Scataphagos]

Good luck to OP.
if you cannot take 50% drawdown ,you should not be trading anyway

That's just hogwash!

IMV... if you CAN take a 50% drawdown, you should NOT be trading. It's just a matter of time before you're busted.

 

[rb7]

I guess I think a bit different. I think about the money, forget all this drawdown stuff. And number of losing days stuff.

If I had $1 million (provided i have $10 million sitting somewhere) in my account that I want to use for investing and grow my money and a trader approach and saying I have system with the back test results of
Yearly returns:
2013: +120%
2014: +204%
2015: +48%

Largest drawdowns in each year:
2013: -55%
2014: -40%
2015: -56%

I ask him, "what does drawdown mean" and he/she responds "it simply means you may see your balance drop by 56% during the year, but it will recover and possible end the year on 100%.

I am taking the risk and giving this trader $1 million of my money. I can careless if the account may drop 56%.

To the OP, if you comfortable with the system and its return, go trade it or sale it. That's just my two cents.

A backtest result that is giving me a 2.5:1 YearlyReturn:MaxDrawdown ratio is a big NO-GO for me.
Too risky.
I am aiming at a ratio around 10:1 or higher. A 50% drawdown in backtest will probably result in a 75% drawdown in real trading. Who can possibly recover from that type of loss??? I don't see a guy/gal saying "bah...no big deal, I just lost 3/4 of my money, I'll do better soon, I just need to keep going"...

Backtest results are somewhat useful, but it has big limitations. It's only the first step when developing a new system/strategy/model for trading.

 

[southall]

That's just hogwash!

IMV... if you CAN take a 50% drawdown, you should NOT be trading. It's just a matter of time before you're busted.

The S&P makes what 10% a year on average? but you have to suffer circa 50% drawdowns sometimes, twice in recent memory.

And millions of people investing in the S&P 500 over the long run where such drawdowns are likely to happen again.

The OP reckons he can do 100+% returns with same sort of drawdown risk as the S&P 500 and you guys want to run for the hills.

 

[Scataphagos]

The S&P makes what 10% on average but you have to suffer circa 50% drawdowns sometimes,

Only a FOOL would accept this as "normal".

OP "recons he can make 100%"?. I'll take the under.

 

[southall]

If you accept this as "normal", you're a FOOL!

If you invest in the S&P 500 for the long haul you better expect 50% drawdowns at some point for your paltry 10% a year returns.

 

[Scataphagos]

If you invest in the S&P 500 for the long haul you better expect 50% drawdowns at some point for your paltry 10% a year returns.

More HOGWASH!

Not comparing B&H investing to trading.

 

[rb7]

The S&P makes what 10% a year on average? but you have to suffer circa 50% drawdowns sometimes, twice in recent memory.

And millions of people investing in the S&P 500 over the long run where such drawdowns are likely to happen again.

The OP reckons he can do 100+% returns with same sort of drawdown risk as the S&P 500 and you guys want to run for the hills.

50% drawdown in the S&P???????

I should have missed something here....

 

[southall]

More HOGWASH!

You obviously dont remember 2002 and 2008. and 1987

 

[Xela]

The OP reckons he can do 100+% returns with same sort of drawdown risk as the S&P 500

Please excuse my mentioning that I think that's a terribly misleading characterisation of what's been described in this thread. The OP has those huge drawdowns all the time, whereas with the S&P they're rare. That's really a hugely different proposition.

I'm not so much "running for the hills", but certainly I'm mentally dividing all the figures (drawdown and profit) by about 15, to make the apparent drawdown-risk acceptable, before seeing how good the profits look.

Just my perspective (well, maybe not "just": it would clearly also be the perspective of any serious potential backer/institution ... not that they'd be willing even to look at theoretical results and/or results without slippage being included anyway, obviously).

More HOGWASH!

I have the feeling that (perhaps not for the first time) you've neatly summed up there, in two words, what somehow took me a few paragraphs to say.

 

[Van_der_Voort_4]

Yearly returns:
2013: +120%
2014: +204%
2015: +48%

Largest drawdowns in each year:
2013: -55%
2014: -40%
2015: -56%

I am taking the risk and giving this trader $1 million of my money. I can careless if the account may drop 56%.

Chart of distribution of profits is in % and not money
need to have guts to trade this system
To withdraw profits each year would be prudent thing to do