How do you know when your strategy stop being profitable vs a short drawdown period?

[rb7]

I mostly trade FX pairs and ES, I tried to be as stringent as possible to develop something that doesn't require overfitting and relatively simple. I forward tested it for the past 2 weeks which was behaving well. But this week once I go live, I lost 3 days in a row. Looking back at the charts, I can say that I am unlucky and entered during a 3 day drop.

Do you mean that your system is long-biased only?

 

[jennywestwong]

Do you mean that your system is long-biased only?

No, my system can go long and short, it's just unfortunate that 3 days in a row it entered when there was a slight pullback, yet not enough to reaching my profit target.

 

[Math_Wiz]

If you're in the zone, as you should be, then ultimately it will be your Inner Vision, your Gut, your Instinct, your Heart, your Spirit, your Third Eye, or whatever other name you have for that part of you that will essentially scream at you that there has been a reversal and your system needs to change immediately. Listen to that inner voice. Give thanks daily for the good things in your life. This simple action helps to nourish the inner voice.

 

[murray t turtle]

Let say you developed a new strategy and backtested the past few years that looks to be profitable. When you decided to go live, the first few weeks is also profitable, but then it starts loosing consistently. Would you consider this "edge" is over or it's simply a short drawdown period? When is it time to stop using this strategy / pause it?

%%
Mainly depends on if its short or long/system\plan.
I like to get paid every week more or less;
but'' a few weeks profitable then changes'' may or may not tell us much.
I closed out a TECS profit today; but thatt one has plenty of weeks its not profitable...................................................................................... 10 year$ is much better than 3 years/ which may not include a bull + bear market move.
Good question; hope this helps \it helped me.

 

[Dr_Trade]

I think you can’t sit around one strategy although you have tested it for 1 year or 10. Considering the highest volatility in this market, according to me always be ready with plan B to cover the losses if gone against you. Use your skills to have better plans in such situations

 

[murray t turtle]

I mostly trade FX pairs and ES, I tried to be as stringent as possible to develop something that doesn't require overfitting and relatively simple. I forward tested it for the past 2 weeks which was behaving well. But this week once I go live, I lost 3 days in a row. Looking back at the charts, I can say that I am unlucky and entered during a 3 day drop.

%%
I dont trade ES anymore, but I've seen Buy1 Sell2 [journal] make plenty of money/long term/drawdowns + short term trading ES.[So he is diversified on his timeframe+ risks small enough most likely for drawdowns not to bother his capital much ]
I trade SPY/spxl, so its easy for me to figure out what his ES moves/trades are.
Using concrete examples on stuff i trade with profits,like QQQ, a 1-3 day dip tends to be a buy/above 200 day moving average .SQQQ [inverse etf] which profits off bearish moves\ has never in its lifetime, averaged what % QQQ or TQQQ has. Did take some small inverse profits on a 3x inverse ETF today.
On the charts \SPY,spxl, went down week of FEB 15,feb22. SO, no, if my longs lost money that week, i still know an uptrend edge when i see it.
BUT Stock Traders Almanac book, helps; FEB + SEPT maybe down in QQQ, SPY[es].......FEB,SEPT were down plenty in past 3 years........
Actually QQQ is easier to profit for me, than TQQQ, but i do both.