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>Which gets me back to - shouldn't we be looking for systems with a low
optimal f.
>Am I correct in thinking that if optimal f is .10, then when the largest
losing trade is encountered 10% of the stake is gone, and if optimal f is
.2, then when the largest losing trade is encountered, 20% of the stake is
gone.
Your math is correct, but the point that is being missed is that you are seeking to minimize DD rather than maximize equity growth. If your investor utility is something other than wealth maximization, optimal f is an inappropriate tool.
Note: It is very possible that 2 systems could have similar TWRs but different f. All other things being equal, the system with the lower f may have lower DD.
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