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trader@xxxxxxxxxxxx wrote:
>
> ----- Original Message -----
> From: "MT"
>
> > In any case, I would empirically quantify the fact that any system has
> > "stopped working", if it exceeds its previous depth and duration of
> > drawdown by a wide margin. If e.g. MaxDD during the last 5-months
> > increased to $32k vs $22k for the previous 51months, i'd say it stopped
> > working.
>
> This would also mean that every system will stop working at some
> moment in time since your worst DD is in front of you and not behind you.
>
> But, i don't think i personaly do agree with you. Because also that
> 32k DD might be recovered in the next 5 months and the 4 months
> after that you maybe make 60k.
A clarification, so we are all on the same page:
I was referring to one of the OB versions which BF created back in
July02 and posted the TS stats for 51-months until July-02 here in
O-list. During those 51-months (in simulated backtesting), the MaxDD was
22k and it only 3 times did drawdown exceed 10K.
According to BF's last mail on the subject, during the last 5 months
(out-of-sample backtesting) that system experienced a MaxDD of 32k. i.e.
in just 5 months it exceeds its historical MaxDD over the last 5yr by
45%.
Assuming, despite one's best intentions, one has not "optimised" the
system, I would say it stopped working. We didn't see the bf.oddball.9
code, so it's very difficult to tell.
One does Monte-Carlo simul, takes a sample of as many trades as possible
etc in order to have some idea what to expect. At some point, you have
to decide whether to pull the plug or not and in this particular case,
I'd pull it.
> Therefor i think every system will eventualy keep on working. It's just
> that the characteristics (like maxDD etc) might change so much that it
> does not work for you anymore because it's getting to much for you.
I think the approach that "every system will eventualy keep on working"
can be very dangerous. Many markets have changed character and systems
that caused old systems to stop working and new ones start working.
Regards, M
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