Quantifying your loss of edge + retiring a system

D

ducatista

So as time increases we can be sure our edge deteriorates. Any particular ways you guys like to go about calculating this? Resources to recommend?

And any particular threshold you guys like to retire your system? Cue the sarcastic answers like 'when I start losing $'

I suppose there are many variables here including regime shift etc, and how your edge holds up across said periods, but just some general discussion would be nice
 
Quick guide: Keep a log of all trades for each strategy. Track the average ROI % for each trade over a period. For example take 1 year of recent trades this year. Do the same for next year. If the ROI Drops drastically and consistently over the chunk of periods you track, then keep and eye on it. Kill the strategy when it is no longer viable.
 
qaz said:
Quick guide: Keep a log of all trades for each strategy. Track the average ROI % for each trade over a period. For example take 1 year of recent trades this year. Do the same for next year. If the ROI Drops drastically and consistently over the chunk of periods you track, then keep and eye on it. Kill the strategy when it is no longer viable.
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Most strats tend to require adjustments but you're correct that often there's nothing left to optimize. However it's difficult to know whether you've just had two bad performance quarters or the strategy is failing.
 
d08 said:
Most strats tend to require adjustments but you're correct that often there's nothing left to optimize. However it's difficult to know whether you've just had two bad performance quarters or the strategy is failing.
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I only check:what does the market offer me and how much of that did I take.
Performance is always linked to potential in the market.

Sometimes making 5% a month is a proof of the system still working, while in other market conditions 15% a month can be lousy.
 
For daytrading systems, I have a rolling date window of 12 month that i visit every 6 month, where i pick top NP/DD systems per market, this way a system that is working great is prioritised and not working ones will be auto phased out. If a system at any time have two times the 10 year historic max DD, it gets replaced asap.
I debate with myself if i should have 24 month instead of 12.. this method requires you though to have a larger amount of robust systems that is working as a start though.

Also, this method i for sure not "best" or "optimal" it has many drawbacks, but its "a" method, that works for me.
 
virtusa said:
I only check:what does the market offer me and how much of that did I take.
Performance is always linked to potential in the market.

Sometimes making 5% a month is a proof of the system still working, while in other market conditions 15% a month can be lousy.
More...

Very true. In 2013 nothing I did worked well. In early 2020, having a 10-15% month is below expectations. The "I only make X dollars per day, then shut everything down" people are quite hilarious though. Treating trading like a 9 to 5.
 
[QUOTE="d08, post: 5097164, member: The "I only make X dollars per day, then shut everything down" people are quite hilarious though. Treating trading like a 9 to 5.[/QUOTE]

Depends of your situation.
If you have no money you should/need to trade a lot.
If you have millions in the bank you probably want to reduce trading hours and enjoy life more.
Priorities change depending on your financial situation.
 
ducatista said:
So as time increases we can be sure our edge deteriorates. Any particular ways you guys like to go about calculating this? Resources to recommend?

And any particular threshold you guys like to retire your system? Cue the sarcastic answers like 'when I start losing $'

I suppose there are many variables here including regime shift etc, and how your edge holds up across said periods, but just some general discussion would be nice
More...


Your edge deteriorates but the simplicity of trading and human nature doesn't change, greed and fear and thus trading remains simple as losing weight, eat less exercise more, In matter fact it gets bigger and faster with the internet more participants are around as also the population growing since bubbles of 100 years ago.

Of course easier said than done
 
virtusa said:
Depends of your situation.
If you have no money you should/need to trade a lot.
If you have millions in the bank you probably want to reduce trading hours and enjoy life more.
Priorities change depending on your financial situation.
More...

The goals appear to be always in the hundreds of USD, so it's unlikely they have millions in the bank.
 
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d08 said:
Depends of your situation.
If you have no money you should/need to trade a lot.
If you have millions in the bank you probably want to reduce trading hours and enjoy life more.
Priorities change depending on your financial situation.
More...

The goals appear to be always in the hundreds of USD, so it's unlikely they have millions in the bank.[/QUOTE]


True that

two things for sure

as you get older and or have more money u get lazier, i e wanna live more n enjoy life
 
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