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I wish I could tell you what works, but I can tell you what
does not (at least for my type of system). I tried testing
this a couple years ago but it reducing my returns more
than drawdowns. I only tried an ApplyStop approaches so
there could easily be several ways to make this work that I
did not try.
ApplyStop did not work for me because when my basic system
(the one tha made the equity curve) had a couple of bad
drawdowns, the system often was ready to take off
("reversion to the mean"), but that was just the point the
ApplyStop method put me in cash. The result was I still got
much of the worse drawdowns but missed all of the initial
recovery following the drawdown.
One Tip: When testing on the equity curve, you have to
carefully think through what your entry/exit delays should
be. If it is a regular entry or exit (ie action based on
indicators not related to the equity curve), the delay
should be zero (since the original equity curve already has
the delay built in), but if the action is based on the
equity curve itself, then the delay should usually be 1.
Another Tip: Here is an alternative I have found to be more
promising for reducing drawdowns. Try rebalancing between
the equity curves for two or three systems.
One nice thing about is that buying and selling equity
curves are fast.
b
--- eric paradis <thechemistrybetweenus@xxxxxxxxx> wrote:
>
> I had this thought today about trading my own equity
> curve, as part of the risk management of my system.
> Basically using 1 or a portion of the existing rules
> of the system, but on the equity curve. Ideally,
> modifying the systems risk levels when in a drawdown
> and increasing to normal risk when in a trend. Any
> idea on the best place to start this, or if anyone has
> a similar implementation?
>
> Thanks,
>
> Eric
>
>
>
>
> ____________________________________________________
> Start your day with Yahoo! - make it your home page
> http://www.yahoo.com/r/hs
>
>
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