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I personnaly feel that backajusting the number of contracts is probably the
best method to find out about the "real draw down" or the "real profits" of
a system. I developed (well, i am sure i am not the first who came up with
this idea) a method once, which took the highest high ever (HHE) and devided
it by the actual close of the market and traded the number of contracts
based on that method.
The volatility of the ATR can be temporary high, so it does not give a valid
number for the number of contracts.
Excample of my method:
SP closing price today = 1200 = HHE (lets asume that was the highest high
over the whole period)
SP closing price 1994 = 450
Number of contracts to trade = abs(HHE/C)
Just one of my methods which i occassionaly use. Actually that is one of the
reasons why i like testing and trading the BUND much more, because it
oscilates arround 100. So in my opinion the simple $ stops are more valid
through out all market conditions and more valid then a $1000 stop in the
S&P for excample.
Volker
***-----Original Message-----
***From: pierre.orphelin [mailto:pierre.orphelin@xxxxxxxxxx]
***Sent: Tuesday, October 19, 1999 4:32 PM
***To: Omega List
***Subject: Re: PROBLEM in long-term sp backtesting!
***
***
***
***----- Message d'origine -----
***De : <editorial@xxxxxxxxxxxxx>
*** >
***> It doesn't matter how you calculate it; it is not valid to
***apply system statistics from the markets of 10, 15, or 20 years
***ago to derive expectations for today. The markets (and
***certainly the spoos, which was the market which was mentioned in
***the original question) are too different today.
***>
***> There may be some way to derive "valid" drawdown expectations
***for today's markets based on longer-term history. But I do not
***know what that method is. Certainly, simple calculation of
***drawdown as a percentage will not do it. Pierre?
***>
***
***I usually evaluate the average price level where the maxdd occurs.
***Then actualize this value according to the current value of the
***considered market.
***As my trading system policy is to keep the system until the
***actualized maxdd *2 ( or 2.5) was met, I have never seen a
***system that I have tested over huge unseen database that met
***this fatal criterion.
***Drawdown expressed as a percent of the price level should do
***the trick too, if you consider the price level reference in the
***drawdown zone ( alternate and more subtle calculation may be
***devised , but the important thing is to have a valid drawdown
***order of magnitude:
***Drawdown is bound to be ounumbered in real world, but it's
***important to consider the actualized DD.
***
*** Sincerely,
***
***-Pierre Orphelin
***Neurofuzzy Logic tools for TradeStation
***Free evaluation versions and competitive upgrades available
***web: http://www.sirtrade.com
***
***
***
***> Of course, you could test your hypothesis... Check the
***drawdown on the system from, say '85 to '95 then check the
***drawdown from '95 through the present and see how the
***percentages compare...
***>
***>
***>
***> ---- you wrote:
***> > I think the individual drawdowns, when performed over such a
***long time span,
***> > should be calculated as percentages and the max PERCENTAGE
***reported.
***> > (Percentage would be drawdown in dollars divided by the
***total value of the
***> > contract at the time.)
***> >
***> > Carroll Slemaker
***> >
***> >
***>
***>
***>
***
***
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