You are making a dangerous assumption that the distribution of wins/losses in time is random. If losses tend to happen sequentially, that's a recipe for an account blowup - one that obviously can be mitigated by trading smaller sizes.
Just trying to make a point. I think the larger issue is the fact that JBT has no notion of instantaneous draw-down. On Sat, Jan 12, 2013 at 4:27 PM, Eugene Kononov <[email protected]> wrote: > >> >> Do you have an idea of the maximum draw down of your system while trading >> all strategies simultaneously? From a risk management perspective, this >> would be the figure to look at. Of course I could sum up all individual draw >> downs but the actual maximum draw down is probably much less. >> > > I don't pay much attention to the Max DD metric. I think the entire measure > is misleading. For example, consider two strategies, A and B, and here are > the respective trades: > > A: {+200, -100, +200, -100, +200, -100, +200} > B: {+200, -100, -100, -100, +200, +200, +200} > > Notice that the distribution of trades is exactly the same, and so are the > profit factors, expectancy, net profit, standard deviation, and Kelly. The > only thing that is different is Max DD, which is $100 for strategy A, and > $300 for strategy B. Does that make strategy A better than strategy B? No, > they are the same strategy where the sequence of trades is shuffled. > > In my optimization runs, I rely almost exclusively on the PI, and the CPI > (which is a new performance measure, to be introduced in the next JBT > release). > > > -- > You received this message because you are subscribed to the Google Groups > "JBookTrader" group. > To post to this group, send email to [email protected]. > To unsubscribe from this group, send email to > [email protected]. > For more options, visit this group at > http://groups.google.com/group/jbooktrader?hl=en. -- You received this message because you are subscribed to the Google Groups "JBookTrader" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/jbooktrader?hl=en.
