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> Interesting test, Gary. I assume you were decreasing size during
> the drawdown?
Yup. It traded 1 per $20k, on the way up & down.
> Question.... did you calculate the Sharpe ratio?
No, but I'm sure it's worse. It's definitely a bumpier ride.
> That means you might have been able to trade a constant 8 or 9
> contracts and ended up at the same place with a smoother eq curve.
If you knew that ahead of time, yes, you probably could have. If you
calculated the Sharpe ratio for both approaches for the history
before this test, you might have determined the non-pyramided version
had a higher Sharpe and thus could be leveraged higher.
The pyramided version still catches up and passes it eventually,
though, and then it leaves it WAY back in the dust.
That assumes you NEVER increase the size on your account. Would you
periodically re-calc the Sharpe, look at the account size, and adjust
your size? Or would you stay at a constant level forever?
> Or, if you want to pyramid and be conservative, how about starting
> smaller, like 3% or 4% risk (maybe 3 contracts to start), and once
> you increase size, don't let it go smaller? That's what gave the
> best combo of high total returns and a smooth curve on my tests.
Works great -- as long as your meltdown period doesn't last too long.
If it does, and you don't decrease the size, you're much more likely
to auger it into the ground at high speed. :-( Play with this
spreadsheet for a while and I think you might re-think that approach.
Gary
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