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Mike,
One may have extreme confidence in the system, but markets change.
Everybody should have a drawdown limit after which trading would stop.
I'm talking about the largest drawdown in that system's history which
cannot be exceeded without suffering non-affordable loss.
It could be temporary and the subsequent paper trading will show it. When
the normal pattern is resumed, trading can be started again.
If the abnormal pattern continues, the system must be adjusted or
redesigned.
This is how I'd go about such a problem.
Jan Philipp
----- Original Message -----
From: "Mike Higgs" <moongateca@xxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Wednesday, November 28, 2001 2:31 PM
Subject: Re: Will "trade" my great tradingsystem
> Gary,
>
> > In my testing of this idea, I found it useless for any system I would
> > consider trading.
> >
> > The problem is, you take all the losses that pull the equity curve
> > down below your threshhold. But then you stop trading, and you DON'T
> > take the wins that dig you OUT of the drawdown! The net was negative
> > for most systems I looked at.
>
> Well, I guess another option is to have deep pockets and extreme
confidence
> that your system hasn't derailed.
>
> How do you deal with a string of losses? I'm not talking about filters.
> They are fine in testing but reality is another thing. At what point do
you
> say that the system has a problem.
>
> Regards,
> Mike
>
>
>
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