|
PureBytes Links
Trading Reference Links
|
Phew, Yuki.
Honoured to humbled to receive your lengthy reply. Please be warned: this inspirational, supportive ( and midly cajoling ) reply ( thank you! ) may be transferred into my "Yuki says" handbook! Everything you say strikes a resonant note though, and is taken in good spirit.
I have 25% DD with 4 wins out of the last 30 discretionary trades.
Looking through my last two years' trades tells me that what worked in 2004 is not working in 2005/6. This brings me to the point in my 2005 trading plan where I defined conditions to stop trading. I now need a change of direction: the plan is to continue to explore AB, AFL and the superb posts on this board towards developing a mechanical system. It can't be that hard for me to develope one that does better than my 2005 trading year. Whether I can then actually trade it is a whole different ball game.
You said:
"
And thank goodness not everyone can do this.
We need some productive
members of society, too. ^_-
"
LOL.... and yet the lesson we learn about ourselves by trading can make us more productive in other areas!
In summary:
You will never avoid drawdowns: agreed.
Sharper gains (with a reliable system) may come when the equity curve is below its MA. Sounds logical, and worth exploring.
All I am asking is this:
Markets change over time (that is why there is no Holy Grail) and so should our systems, or the ones we choose to trade with, not respond to this? Or we may choose to stand aside for a while. Or just trade different markets with concurrently different systems to create a smoother equity curve overall?
Could you comment on whether you trade with one system only or more than one? And if more than one, what would be a trigger to change if the Equity curve is not the signal to do so? Drawdowns? Sleepless nights? Declining
expectancy? This has to part of our business plan after all. In 2004 I achieved my trading goals, 2005 was not a successful one. Message: time to stop doing what I am doing: it is not working. Do something else. The goal then is to replace what I am doing with something that does work.
I realise the answers to these questions are personal, but it is invaluable to get some insight to the philosophies of others, in an attempt to know where to start.
Regards
ChrisB
Yuki Taga <yukitaga@xxxxxxxxxxxxx> wrote: Hi kris45mar,
Monday, March 13, 2006, 11:35:06 PM, you wrote:
k> b. When the Equity is above the MA, then take the signals.
k> c. when the equity curve falls below its MA, then either.
k> i. stop trading that system until such time as the curve goes back above the MA.
k> ii. or severely reduce position size.
k> iii. and/or swap over to another system that is now above its MA.
You will get various opinions on this, however I think it really
boils down to just how logical you suspect your system methodology
is, and whether you suspect it is actually and finally being
arbitraged out of existence.
If the system has worked for several business cycles in various
market modes, and has never really gotten into serious trouble -- in
other words, it's a system you can trade -- then it would seem to me,
and indeed is what I do, that the time to be more careful is when
equity has been running well above the MA for some rather lengthy
period of time. I'm
inclined to bump *up* position size a little bit
when I start experiencing a losing streak -- in other words when I
get mean reversion or worse of the equity curve. I would certainly
not stop trading when that happens. I think your gut feeling is
exactly opposite of what you should do.
The sharpest gains and nicest times you are likely to ever have are
when equity is making the swing from below average to above average.
This is much more fun than the opposite, and you are going to
experience both. So why would you consider stopping trading when
equity dips below average? Immediately, you would then be preparing
to cheat yourself out of your best performing part of the cycle, and
you would be ready to embrace the worst cycle segment of your system:
when equity moves from above average to below average.
In the end, it all boils down to confidence. You either have a
viable system, or you
don't. If you have one, follow it. If you
can't stand the drawdowns ... IMHO, you don't have a viable system,
and probably should not be trading it. No one should trade any
system that has drawdowns they cannot stomach, and stomach
comfortably, probably max system percentage drawdown times two, maybe
times 2.5 or three.
But if you really do have a system, take every signal. Period. If you
want to "play" your system a little bit, consider something like
*lightening* position size -- slightly -- when equity has been
running above average for some period of time, and *increasing* it
... again, slightly ... when equity has been running below the line
for some time. You have to judge when these conditions might apply
after carefully analyzing your system yourself.
But using the MA of equity to flatly refuse or take signals is simply
a different form of "Holy Grailism". It is a
fear of taking losers,
or an attempt to altogether avoid taking losers, which absolutely
must be taken in any systematic trading. You simply have to have a
system in which you can *stand* to take the losers, and be
comfortable with them. If you don't, you can't trade it, and playing
around using the equity curve as an ultimate filter is not likely to
made a dangerous system safe, or an uncomfortable system comfortable.
You will never, ever, find a system that has an equity curve that
doesn't dance on both sides of a MA. Life doesn't work that way. But
if the curve is obviously solid, in other words, a real curve or
slope, and not an amusement park thrill ride, and all the metrics
look nice over thousands of trades and many years, you may want to
think about doing exactly the opposite of what your gut tells you
when you hit a soft patch.
OTOH, if the last sentence above applies ... why
stress yourself at
all? Take the *&$% signals as they come, and relax. ^_^ If you
cannot stand a loss the magnitude of which would tell you that,
indeed, your system is no longer functioning, you are probably not
well enough capitalized to be in this business. Not everybody is.
And thank goodness not everyone can do this. We need some productive
members of society, too. ^_-
Yuki
Yahoo! Mail
Use Photomail to share photos without annoying attachments.
Please note that this group is for discussion between users only.
To get support from AmiBroker please send an e-mail directly to
SUPPORT {at} amibroker.com
For other support material please check also:
http://www.amibroker.com/support.html
SPONSORED LINKS
YAHOO! GROUPS LINKS
|