|
PureBytes Links
Trading Reference Links
|
All: I have gotten into a private discussion with someone and I wanted
to see your reaction to the concept of DD from entry. We always cite
the MaxDD statistic as being the worse pain we might experience in an
open trade in the future.
It has also been mentioned that entries are not as significant as exits.
If you believe a system is EXCELLENT in choosing entries, then the
postulate is that drawdown from starting trade equity is a useful, even
necessary, statistic to gather to monitor the ongoing success of a
system.
Note that I am not talking about drawdown from absolute starting account
equity, but drawdown of the trade equity committed to the trade. If the
system catches trends (agree that these have been less consistent
recently), then the DD from starting trade equity is and will be quite
low, or at least it should be if the system delivers such performance.
Further, this parameter assumes a differentiation in psychology: to wit:
equity drawdowns from levels that represent positive returns are less
impactful on psyche that "going underwater", ie, having absolute
drawdowns from entry (out of pocket paper losses). If I gain 25% on a
position and it retraces 50%, then I have a Maxdd on the trade of 50%,
but I am still ahead 12.5% in terms of my entry. Doesn't this affect me
differently than having a 10% drawdown right from the beginning of the
trade? Sure it does.
I would appreciate some comments on this way of looking at a system
characterization.
Thanks,
Ken
------------------------ Yahoo! Groups Sponsor ---------------------~-->
Save Smiley. Help put Messenger back in the office.
http://us.click.yahoo.com/4PqtEC/anyFAA/i5gGAA/GHeqlB/TM
---------------------------------------------------------------------~->
Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
|