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Neither of these is a technique I'd put $.02 on, quite easily
demonstrated by bootstrapping representative trades while applying
them. Every time I mention simulation everyones' eyes glaze over, but
if you're not using it for position sizing or money management or
whatever you want to call it, you're flying blind.
--- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx> wrote:
> 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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