money management based on equity curve
- Thread starter robinxing
- Start date
This topic is too broad to talk about, So far...
Few examples:
1. If you're a "fully" discretionary trader, this is merely impossible to do. It's like becoming an opposite person as you are now, but if it's about signals from some system then it can be done.
2. Most "Van Tharp" or Tradestation, Wealth-Lab leveled money management is about equity curve analysis. MaxDD, consecutive win/loss, single regression etc. etc. etc. is simply doing an equity curve analysis.
3a. Systematic traders, using %DD, Consecutive Loss, etc. etc. to turn a model on/off. Some people stick a technical analysis on top the equity curve and stop / fade a model.
3b. Portfolio level system. Some people trade their portfolio (symbol and systems) using the equity curve, just like it's trading the market.
All 3 are different and approached differently. Regardless of analyzing the market or the "equity", there's always the danger of curve-fitting.
Few examples:
1. If you're a "fully" discretionary trader, this is merely impossible to do. It's like becoming an opposite person as you are now, but if it's about signals from some system then it can be done.
2. Most "Van Tharp" or Tradestation, Wealth-Lab leveled money management is about equity curve analysis. MaxDD, consecutive win/loss, single regression etc. etc. etc. is simply doing an equity curve analysis.
3a. Systematic traders, using %DD, Consecutive Loss, etc. etc. to turn a model on/off. Some people stick a technical analysis on top the equity curve and stop / fade a model.
3b. Portfolio level system. Some people trade their portfolio (symbol and systems) using the equity curve, just like it's trading the market.
All 3 are different and approached differently. Regardless of analyzing the market or the "equity", there's always the danger of curve-fitting.
Murray Ruggiero
Sponsor
I have done a lot of work on this topic over the years and in fact wrote one of the first articles on trading the equity curve back in the mid 1990's. Equity curve filtering of a trading system create a feedback loop. One problem is that since your filtering the system you need to set up an unfiltered mirror version. This often requires complex code and writing a custom backtester within the system in most platforms. In TradersStudio I added a second backtesting channel for this. I created two sets of buy,sell,exitlong,exitshort instructions. One, which shows up on the backtesting report and another, which are virtual, you, can access all the statistics but they do not affect the reports. This makes it much easier to do equity curve filtering of a system in TradersStudio.
Original poster asks: "money management based on equity curve, is it possible?"
Of course it is possible. Whether you will be pleased with the results, or not, is a matter of individual preference.
You might wish to use Google to find a published study by market wizard Tom Basso, in which he applies the technical indicator "Momentum" to the equity curves of professional traders (Commodity Trading Advisors, "CTAs"). Basso is pleased with the results. The title of the study is When to Allocate to a CTA? Buy them on Sale
Of course it is possible. Whether you will be pleased with the results, or not, is a matter of individual preference.
You might wish to use Google to find a published study by market wizard Tom Basso, in which he applies the technical indicator "Momentum" to the equity curves of professional traders (Commodity Trading Advisors, "CTAs"). Basso is pleased with the results. The title of the study is When to Allocate to a CTA? Buy them on Sale
Murray,
It's not complex to get unfiltered data set. It's a matter of traders being lazy (sorry, but the fact that you mention it in your post, I would have to include you in it).
Murray, how serious are(is) you (TradersStudio) about making money.
That is outdated information.
Largely because anyone "was" able to start up a fund, with a little trading system that was "marketable" as "unique".