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Dave,
There is a good link I came across:
http://www.arbtrading.com/moneymanagement.htm
I like the Anti-Martingale and Martingale (doubling up) systems to
manage drawdowns. I would use a combination of these systems, so
that when I'm losing money I would use Martingale system and when I'm
finally making money with the final position, I would be
automatically switched over to Anti-Martingale system, but may most
likely exit losing positions at break-even price. I would double up
only when I get stronger signals verfied by OB/OS conditions in the
subsequent session, so that my system of using 3BSMA for the next
session is temporarily suspended. It does take usually about 3 days
for a trend-change to fully develop. I would not double up beyond 3
consecutive days, because if you are wrong 4 times in a row, most
likely the market is starting a new trend in the opposite direction
and will go against you and so better to exit. I have done this many
times, as I find it impossible to optimize my entry points. But the
safest course is to wait for the actual Trend-change signal verified
by OB/OS conditions, then you may never have to double up but you may
miss some signals. This may sound crazy for some but it does seem to
work for me especially with the AFL pivot points to predict the Next
bar approximate High/Low of Day and appropriate position sizing.
Regarding whether your system has stopped working or not, it is hard
to say. I would try to improve the system performance using a system
of filters, stops and walkforward testing. Easier said than done...
Regards,
Pal
--- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
wrote:
> I've been wondering, could I trade a system with 50% average gain
per year
> since '95, and max system drawdown of 40-50%. even if I've seen
that in
> backtests beforehand, could I really look at that kind of drop in
my account
> and still believe I was doing the right thing? or would I think
it'd finally
> just stopped working? and if I am able to ignore that much
drawdown, how
> would I know if it really *had* stopped working?
>
> by the half-the-gain-twice-the-drawdown tolerability rule, this is a
> non-starter.
>
> dave
> Defense ... Yep or as I've said it's not what you make, it's what
you
> keep. DD's are killers from lots of aspects not just in terms of
> what they do to your account balance but also what they do to ones
> ability psycologically to trade and stay with systems that do
work.
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