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Hi Nick,
Saturday, May 27, 2006, 8:14:09 PM, you wrote:
NA> Just playing devils advocate but having tighter stops will also lower your
NA> percentage of winners if it takes out some of the big ones the system may
NA> become unviable. Tom, reading up on maximum adverse excursions might be
NA> useful. I'd go further than Keith if you optimised with in sample test data
NA> consider stopping right now. There is a lot more to system design than just
NA> 'a formula' (mentioned in your first post)....that's one reason why I prefer
NA> trading a 'method' (discretionary trading).
A "method" is, by definition, a system. ^_^
That said, the numbers I saw were not to my liking at all. Not
close. Two few trades to rule out a large element of chance, just
for starters. Too much drawdown, in any case, particularly since MSDD
can always be expected to be somewhat greater in reality than in a
backtest.
I agree thoroughly however with those who have observed that stops
virtually always are a cure that is worse than the disease. One
needs a robust system, not an attempt to cure the terminally ill.
Stops are an attempt to avoid outliers, and outliers are simply part
of doing business. If one's system cannot deal with outliers on its
own, it is likely not a very robust system.
Yuki
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