|
PureBytes Links
Trading Reference Links
|
> Only because I was focusing on the exit. Give me a well-chosen
> entry over a coin toss any day.
OK, I thought you were promoting the "entries are unimportant, only
the exit counts" school of thought.
> I'm assuming your interest in total drawdown comes from having to
> deal with clients
That's certainly heightened my awareness!! But it was very
definitely an issue when I was only responsible for my own money.
Even then I had to answer to She Who Must Be Obeyed! :-)
I'm perfectly happy to take a beating on individual trades (well, OK,
not *happy*!!) if I believe the system will do better in the long run
by doing so. Overall drawdown is a much more critical measure than
individual trade risk, in my mind.
> Doesn't risk per trade cumulatively translate into drawdown?
No, and it doesn't take an incredibly high win ratio. If your
average loss is, say, $1000 and your average *trade* is $500, you
should do OK no matter what your win% is. On average you'll make
$500 on each trade. If you take a large $2000 loss, on average it
will only take 4 trades to get back in the black again. If you have
a really low win%, it might take more than 4 trades before you hit a
winner and come out of the hole, but in that case you must have a
pretty large average win to make up for the low win%. In either case
you should be out of the woods quickly.
(That assumes a system with decent stats, e.g. it doesn't have a high
average trade because of 1 or 2 huge outlier wins.)
> I'm not sure what you're using for exits but you've only mentioned
> bail-out stops. If you are going to avoid drawdowns, then your
> exits must be such that they amount to risk-defined stops.
I use a number of different exit strategies. I don't trade a system
unless it meets my (very stringent) standards.
Gary
|