Re: [amibroker] Re: Is this a good system?

Fri, 26 May 2006 23:40:44 -0700

Phsst and Dingo and Mark,
I have backtested using a trailing 10% stop and a 10% stop. Both were terrible. My profits were considerably less. I had more trades and my winning % dropped. I didn't write down the figures because they were terrible. I guess that my formula requires that you handle the losses to work. As I said in my last post, I will try to improve it. I did backtest it using $100000 from 9/28/82 until 12/31/1999 to see what happen before 2000. The results were
Profit = 523,614      Annual return = 25.78%     Winning % = 77.08   System DD = 38.52
Basically it is the same. Therefore, it was consistant for over 20 years. The only problem is the risk. I will work on it and post the results if and when I improve them.
 
Thanks again,
Tom
Subject: [amibroker] Re: Is this a good system?

> Dingo mentioned stops.  You could try percentage loss, either fixed
or a function of ATR....

My own experience with stops on actual individual trades (and
backtested results) over quite a long period of time has proven that
no matter how well you engineer your stop loss system, you are going
to experience the occasional 35% to 60% 'overnight' loss on individual
stocks that either announce poor guidance or that have been the
victims of targeted attacks from short sellers who have managed to
locate a public 'mouthpiece' to publicize their 'rumors'.

Back in the middle to late 80's, a fella named Dan Dorfman on CNBC
used to regularly cost me high percentage losses on my individual
stocks by broadcasting rumors that were fed to him by people that I
later learned were manipulators who had channels to Dorfman in order
to publicize the messages they wanted publicized.

The smaller the number of trades in your system, the more closely the
correlation will be between MaxTradeDD and MaxSysDD.

In my systems, I seek larger number of trades so that the occasional
50% "Trade" drawdown is offset by the greater number of trades whose
stability prevents a large MaxSystemDD as a result of individual Trade
Drawdowns.

Insofar as Dingos comments about 5% and 10% system drawdowns, I agree
with him.

Even when I am trading a 'system'... If I experience system drawdowns
of a relative small percentage that correspond to overall market
volatilitiy, I'll start downsizing my exposure (abandoning my own
system). I did this in early 2000 and was happy to ignore my systems
during the major market stumble during that time period.

Unfortunately, I have not been able to automate a backtest system that
would have taken me out of the market during that timeframe.

I'm not offering a lesson or instruction, but am just sharing real
experience.







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