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Zsuzsa,
Another approach you might want to consider for equity curve trading is to
only apply a moving average when the equity falls below some normally
expected threshold, such as the maximum historical draw down. Above this
threshold you trade normally. This approach might be appropriate if some of
your trades are much larger than others. You don't want to cut these out
unless your system is really behaving abnormally. A further possible
refinement to cut down whipsaws if you are below the mdd is to require that
your equity rises back above both the moving average and the mdd threshold.
If your system is really going in the tank you may never get there.
One implimentation strategy is to do the equity curve work in Excel, after
you've exported the trade history there. This has a number of advantages,
including the ability to randomly sort the trade sequence to see how your
equity curve strategy would have worked if the trades occured in a different
order. For some systems this is not appropriate, but it sure can be eye
opening.
Larry
> I have developed such a system that trades the psudo equity curve. You
> first have to write your system with a simulation of your trading rules.
> This involves computing the phantom trades and the subsequent
> phantom equity
> curve (PEC). Once the PEC turns positive (I use a exponential moving
> average of the PEC) I generate an OK to trade flag which enables
> the trading
> rules. My research indicates this works on most markets for my breakout
> system. I don't claim that this technique works for all systems.
>
> Part of the complication is the need to exactly model the psudo system
> especially the stop-loss logic. Double check the PEC with the
> actual equity
> curve when the OK to trade flag is forced to be always TRUE. It
> takes a lot
> of double checking and crafty programming to get the two curves to agree.
> Some tricks is to track two PECs; one for long trades and one for shorts.
>
> FYI- I got this idea from a Joe Krutsinger TradeStation seminar
> in Denver a
> few years ago. Joe suggested that "Trading the equity curve was a
> profitable area to investigate." I just got my latest issue of "Active
> Trader Magazine" which has an article by Joe on guess what? Equity curve
> trading!
>
> Marlowe
>
>
> ----- Original Message -----
> From: William Brower <1000mileman@xxxxxxxxxxxxxx>
> To: Zsuzsa <zsuzsa@xxxxxxxxxxxxxx>; <omega-list@xxxxxxxxxx>
> Sent: Tuesday, September 05, 2000 8:12 AM
> Subject: Re: EL Help please
>
>
> > This type of programming requires tracking actual trades and theoretical
> > trades. You need to write a piece of code that theoretically
> trades. If
> > the theoretical trade meet your condition you take the next actual
> > trade. This is not always a simple task.
> >
> > At 11:52 PM 9/4/00 -0400, you wrote:
> > >I am trying to create a system that takes into account previous profits
> > >and loses.
> > >
> > >In other words I would take a position if the previous trade was
> > >profitable by $X or X points.
> > >In TS2K there is a reserved word ProfitPosition, but I can't figure out
> > >how to use it.
> > >Any hints or help would be appreciated
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