Will this ER2 system work?

[DerferMark]

Quote from frostengine:

DeferMark,

A suggestion... acording to your system your largest draw down is somewhere in the neighborhood of 1k per contract correct, and you are currently up 7K from this system.

You should begin trading 2 contracts. If your equity drops by more than 3k from where your at go back to 1 contract. This gives your system 1.5k of wiggle room per contract which is 1 and 1/2 times your biggest draw down to date. That should be more than enough room incase your edge hits a bad period. If this draw down happens, at that point you will still be 4k in the green, and if you have faith in your system you can go back down to 1 contract... If it doesnt happen you will start making money at 2X's the rate.....

Actually biggest drawdown to date is $2400 per contract. I hear ya though - I just wish my other trading hadn't sucked up most of my $7k gain. :eek:
Hopefully I can get up to trading 2 contracts soon w/o worrying about double the volatility in the equity curve. The real question is what is an acceptable drawdown in terms of % of capital. 50% is too high, but 25% seems reasonable imho...

 

[DerferMark]

Quote from Stacked:

Congrats on the system! I would love to learn how to write some type of system, though I have no idea where to even start! (I guess there is some book I could read)lol.

Hey I'm in Chicago too maybe you can teach me! J/K I wish you continued success!

Thanks stacked!

I wish I had the time/wisdom to help you out more. (even though you said you were joking)...

I do all my backtesting in Excel. Manually going through historical charts and recording different variables. Yes very time consuming... I should learn TradeStation and try to automate backtesting.

For example, to test a simple MAvg. cross system (hypothetical) where you enter a position at close of price bar and get out within 10 mins., you might want to record on each row of a spreadsheet (for every cross), date, time, short/long, slope of faster MAvg at cross, max gain in 10 mins., max. loss in 10 mins., and gain/loss if exit in 10 mins.

Then you can add formulas to see if a winning method exists based on changing your target, or your stop, or only taking trade if slope is > X, etc. and watching how the equity curve changes that you've charted. I love Excel! Don't forget to deduct commission and slippage!

 

[aus_SPIder]

compared to the first P/L chart the 2nd optimization looks awfully curve-fit.

i think ud better try it on another closely correlated market with the optimized version. If it comes out with approximately similar results then you can start trading it.

 

[Stacked]

Quote from DerferMark:

Thanks stacked!

I wish I had the time/wisdom to help you out more. (even though you said you were joking)...

I do all my backtesting in Excel. Manually going through historical charts and recording different variables. Yes very time consuming... I should learn TradeStation and try to automate backtesting.

For example, to test a simple MAvg. cross system (hypothetical) where you enter a position at close of price bar and get out within 10 mins., you might want to record on each row of a spreadsheet (for every cross), date, time, short/long, slope of faster MAvg at cross, max gain in 10 mins., max. loss in 10 mins., and gain/loss if exit in 10 mins.

Then you can add formulas to see if a winning method exists based on changing your target, or your stop, or only taking trade if slope is > X, etc. and watching how the equity curve changes that you've charted. I love Excel! Don't forget to deduct commission and slippage!

Wow over my head (getting excel to do that) I do remember making some spreadsheets in college though! I have tradestation though I have never fooled around with any easy language stuff, except for some premade indicators on charts.

Impressive I'd really love to learn to write some programs and BT them just to play around...someday.

 

[DerferMark]

Quote from aus_SPIder:

compared to the first P/L chart the 2nd optimization looks awfully curve-fit.

i think ud better try it on another closely correlated market with the optimized version. If it comes out with approximately similar results then you can start trading it.

Thanks but you're missing something or I don't understand what your saying - I've been trading it since 2/27/06. The period from 12/11/03 until 2/27/06 was the backtest period and is optimized (see PDF file on page 1 of this thread). Since 2/27, results are actual. No 2nd optimizations have been done and I hope I never need to...