When to Stop a Trading System

Q.E.D. said:
IMO, those systems never should have been traded in the real world: nothing in above results is anything likely (possible) to occur in reality. Results are due to data-fitting, IMO.
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Good Morning Q.E.D.,

Thank you for the response.
 
TrAndy2022 said:
Another rule you can watch out, is the underlying market reward-risk-ratio how much it goes up to its drawdown in relation the combined portfolio. When the portfolio is worse than it does not make sense to trade this, because B&H would be better in this case. Here you can also divide any time period into sub periods to measure this.
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Good Morning TrAndy2022,

Thanks for your response.
 
Had a trading system once, that had 80% win rate. I thought it was pretty high and suspect. Backtested it manually on 118 trades. Still got good results. I though then, that even if the win rate went down, it should still be profitable. So, I traded it using small amounts to actually, test it real time. I had 7 live trades, 6 of which were losing trades. Only 1 was a winner. Reviewing the trades, I saw the the slippage was huge and that doomed the trading system. I dumped it right after. Nothing like trading it live to see if it really holds up during market conditions.
 
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Businessman said:
There should be some really bad drawdown(s) in your back test already. Otherwise it is probably curve fit or not long enough.

This maybe the case with your back test (hard for me tell given your limited metrics).

If so anything more than the biggest drawdown that you saw in the last 16 years would be a red flag.
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Hello Businessman,

Thanks for the response.

Yes, I am thinking of sticking to rule of if live results shows 2 times drawdown, stop the system.
 
Gambitman said:
I believe it was Charlie Wright who said in a trade station video 25 years ago something to the affect of “when it stops making money in the environment it should make money.” 2.5x drawdowns are table stakes.
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Hello Gambitman,

This is a very good comment. Thank you and very Good point.
 
Businessman said:
Is it? Its not clear to me that it is.

Take system "A", is the 162K figure the profit per year or the total profit over 16 years?
If it is 162K per year, then I agree, the largest drawdown is very small.

However if it is total profit over 16 years. Then the average yearly profit for System "A" is only 10K a year and the biggest drawdown is 7K.
A 7K drawdown for a system that makes 10K a year is not a small drawdown.
If so then his back tests could already be including some large drawdowns, which is good.
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Hello Businessman,

The net profit is the total for 16 years of historical back test. Lol, I wish it was for one year.
 
If only high win rates like 60%,70%,80% (with at least 1:1 Risk Reward) were possible with a mechanical/automated system.

Trading would easy and we would all be rich already.

But we all know trading is not easy.
 
Businessman said:
If only high win rates like 60%,70%,80% (with at least 1:1 Risk Reward) etc were possible with a mechanical/automated system.

Trading would easy and we would all be rich already.

But we all know trading is not easy.
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Hello Businessman,

I like to keep an open mind and not know anything when it comes to trading. Anything is possible.

I believe there are traders rather it be discretionary or automated system trading with win rates from 10-100% that is making a lot of money and rich already.

Just because I can't achieve this win rates and results, does it means it does not exist.
 
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