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Hello,
can you recommend Chan's book?
Greetings,
Thomas
On 10.05.2009, 05:17:24 dloyer123 wrote:
> > If you are trading a system ( fully backtested, made money
> > in real world etc), how can you really know when it is
> > starting to fail?
>
> I think that we all face this question. I ran across a good answer in
> Chan's book "Quantitative Trading".
>
> The short version is calculate returns/stdev(returns)^2. Where the returns
> are 1.05 for a 5% win and 0.95 for a 5% loss. The result can be > 1 for a
> good system.
>
> Make sure that your position sizes are always much less than this number as
> a fraction of your account. If it starts to get small, then you have your
> answer.
>
> There is a more general version of this equation in Chan's book that
> applies to portfolios of trading system, if you know the correlation of
> returns between the systems.
>
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