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Hi Ian,
Thanks for your post. Sorry, I forgot to mention that
the max historical dd was not optimized, just
historical dd from a system backtest.
I agree with your "then add 30%-50%."
I have heard this from several other traders as well.
Sincerely,
Todd Hoff
<Date: Wed, 30 Apr 2003 09:57:51 +0800
From: "Ian Copsey" <icopsey@xxxxxxxxxxxxxxxxxxxx>
To: omega-list@xxxxxxxxxx
Subject: RE: when a strategy breaks the max drawdown
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In the original query there was no explanation of how
the maximum DD
was
derived. If it is the one that is given in the system
performance
summary
after optimization, then it is most likely totally
fictitious. One
method of
establishing the MaxDD is to go through walk forward
testing and study
the
drawdowns implied by this, if necessary calculating it
in excel to
overcome
the breaks in between out-of-sample returns. Once you
have done this
over a
long enough period - then add 30%-50%.
Regards
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