Fred, Could you explain as to why 3% wouldn't always limit losses to 3%? Assuming the stock has some volume (at least 100K), and I set stop loss order as soon as I buy stocks...I'm not quite sure of the circumstances where 3% stop loss would not work.
My system is a daytrading system so there is no gap ups and downs. Regards, intermilan04 --- In [email protected], "Fred" <[EMAIL PROTECTED]> wrote: > > Just keep in mind that a 3% stop loss does not necessarily limit > losses to 3% ... > > --- In [email protected], "intermilan04" <intermilan04@> > wrote: > > > > Phsst, > > > > I don't like the trade drawdown more than the system drawdown. I > used > > to think that having a large trade drawdown was OK as long as the > > system drawdown was small, and I think I was wrong. > > > > As a daytrader I take and close out positions daily. Imagine having > > lost 7% on a single trade and having to close out the position at > the > > end of the day...you just registered a huge loss. You are left with > > negative emotion, frustrated because of the lost money. You start > to > > worry about your trading capability and such. I know it's > > psychological stuff but quite important one IMO. > > > > So, as I mentioned earlier I limit my loss at 3%, no matter what. > For > > whatever reason or for no reason, if stock moves 3% against me, I > get > > out. I'd rather not lose 3%, but settling for a 3% loss is > certainly > > better than not having a stop and have a potential to lose big. > > > > --- In [email protected], "Phsst" <phsst@> wrote: > > > > > > Fred's point is accurate IMO.... > > > > > > If the Trader has spent blood, sweat and tears over a period of > years > > > building up a serious trading equity, then a 28% System Drawdown > would > > > be demoralizing (only after causing a serious case of "Butt > Pucker"). > > > > > > A subsequent post from Ed showed a 'Max Sys DD = -3.6%', but only > > > included 48 trades... which because of the small number of trades > > > seemed to me to be statistically irrelevant. > > > > > > > > > --- In [email protected], "Fred" <ftonetti@> wrote: > > > > > > > > A Comment and a suggestion ... > > > > > > > > - DrawDowns ... I could be wrong but I suspect most people > can't > > > > tolerate 28% DD's ... To bring that number down to the point > where > > > > at least some people would be comfortable with it using real > money > > > > one would I think have to cut it half. Doing that with an > existing > > > > system by restricting how invested one is will result in the > CAR > > > > being reduced to the square root of its original number. > > > > > > > > - Objective Testing ... Take your data, cut in half ... > Optimize > > > > your system over half of the data and then test the parameter > values > > > > on the other half. This rudimentary view of out of sample > testing > > > > will give you some idea of what you are likely to experience in > real > > > > trading as opposed to totally in sample results. > > > > > > > > --- In [email protected], "intermilan04" > <intermilan04@> > > > > wrote: > > > > > > > > > > Since I have optimized my system between 1996-2006, I guess > the > > > > > answer would be the same time period. > > > > > > > > > > --- In [email protected], "Fred" <ftonetti@> wrote: > > > > > > > > > > > > That doesn't answer my question ... > > > > > > > > > > > > In the development of the system what range of data ( time > > > > period ) > > > > > > did you use ? The same time period ? An earlier one ? > > > > > > > > > > > > --- In [email protected], "intermilan04" > <intermilan04@> > > > > > > wrote: > > > > > > > > > > > > > > The numbers are the result of backtesting my system with > > > > > > > NASDAQ and NYSE tickers (around 7000 tickers) between > > > > > > > 1996/1/1~2006/1/1. > > > > > > > > > > > > > > --- In [email protected], "Fred" <ftonetti@> > wrote: > > > > > > > > > > > > > > > > Are the numbers you posted in sample or out of sample ? > > > > > > > > > > > > > > > > --- In [email protected], "intermilan04" > > > > <intermilan04@> > > > > > > > > wrote: > > > > > > > > > > > > > > > > > > I know it depends on what you want personally for > > > > risk/reward, > > > > > > but > > > > > > > > I'm > > > > > > > > > curious as to what other people's systems (developed > in > > > > > > Amibroker) > > > > > > > > are > > > > > > > > > performing like. You don't have to share your code or > the > > > > idea > > > > > > behind > > > > > > > > > your system (unless you want to), but I'm curious. > > > > > > > > > > > > > > > > > > Over the last 10 years, say, what is your annual > profit %, > > > > max > > > > > > > > > drawdown, % winning trades, etc.? > > > > > > > > > > > > > > > > > > I have a long system that has returned around 110% > since > > > > > > 1996. Its > > > > > > > > > winning % is 47%, and the system drawdown is 28%. It > is a > > > > > > > > > reversal-based, swing-daytrade system. > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > ------------------------ Yahoo! Groups Sponsor --------------------~--> GFT Forex Trading Accounts As low as $250 with up to 400:1 Leverage. Free Demo. http://us.click.yahoo.com/lpv1TA/jlQNAA/U1CZAA/GHeqlB/TM --------------------------------------------------------------------~-> Please note that this group is for discussion between users only. 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