Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Emily291

Would You Leverage This Strategy?

Recommended Posts

If you had a strategy that had tested well and then performed in live trading as predicted by your testing, and it had a maximum historical drawdown of 20% with no leverage, would you leverage it? If so, by how much?

 

Em

Share this post


Link to post
Share on other sites

Em,

 

You’ve provided tmi. NOT! :)

What is the characteristic slope of the equity curve when system is not in drawdown?

What is the system’s variability of returns? ... what’s its variability of risk per trade ?

What percentage of the time is the system in drawdown?

Is that 20% max drawdown on Total Equity Max Drawdown or Closed Equity Max Drawdown?

Have you run optimal - f for this system (using > than max loss in the max loss parameter) ?

... and used that in running Holding Period Return ?

 

btw

the max drawdown factor (of live trades or of historical testing) for a system to this date is not very useful info

bcse in the real world

The next systemic drawdown is 100% +

Or not.:roll eyes:

Maybe. :)

 

This leveraging decision depends greatly on how much heat and drawdown you are willing to accept. ie

How aggressive are you? Like

Where on the [it’s ‘gunslinger’ money] <-> [it’s ‘I have commitments’ money] continuum are these funds?

Etc ? etc. ?

 

Hth

Share this post


Link to post
Share on other sites
If you had a strategy that had tested well and then performed in live trading as predicted by your testing, and it had a maximum historical drawdown of 20% with no leverage, would you leverage it? If so, by how much?

 

Em

 

A lot of ifs.

 

Find a period of time that it didn't perform as tested. Then, when found, decide whether you want to leverage or trade the strategy at all.

 

If you can't find a period of time that doesn't perform as tested, you do not know how to rigorously test data. In this case, get it over with. Max leverage and get rich or go home broke in the shortest amount of time possible.

Share this post


Link to post
Share on other sites

Just guess, if you can not control other people lost or input money. In a simple interactive system, just between you and the system. In an 20% drawdown, if you a smarter trader, you can cut the lost at 1/3(-7%), which means system can go up 20% if lost -20%, then you probably can leverage 3x, since once you cash out you winning money, system might go down if there no people contritube money into system. But in an continute game, others might have a chance to get a higher reward after you cash out your profit early for capital rebalancing. This is my observation, I am not sure it's right or wrong. Have a fun.:crap:

Share this post


Link to post
Share on other sites

“if you a smarter trader, you can cut the lost at 1/3(-7%)” wmck6167

If you’re saying kill the system at 7%, I don’t agree necessarily, but I do understand... but if you’re saying temporarily turn it off at 7 % , that is system trading heresy. With system trading, missing ANY signals is big no no...

Like -when would you start it back up? ie If you’re great or even just good enough at timing to know when to turn a system on and off, then you likely don’t need a system at all - unless you want automation. At the very least, that is the perfect way to get no where near the results testing revealed bcse you’re really no longer trading the same system... and

usually 'skipping signals' is a ticket for much worse consequences...

To illustrate in the extreme - if you turned the system off after every loss and turned it back after every what would have been a winning signal, you would be actually trading a whole different system from the original design... ie skipping any signal is changing to a different system on the fly...

 

 

"Find a period of time that it didn't perform as tested. Then,..." MM

OR

(btw This is system dependent - ie it’s not optimal for all systems ... but,)

For most systems you can find another system that is negatively correlated and size it up, relative to the main system, when/as main system goes into drawdown

... with correctly paired systems, this works in the long run whether the neg corr’d system is profitable on its own or not !!!

Share this post


Link to post
Share on other sites

Thanks for your feedback. It's a great comment. Just I have some other thoughts about this.

"...With system trading, missing ANY signals is big no no..." If all of traders follow the rules, will system stop draw down process when enough lost occurred at -1/3 position since eveyone are so smart?

Here I think you meant in trading system. What if trading system is conflicted with value system? will you still follow the trading signal? (I assume "time frame" is not considered in this argument) I meant in under value situation, the draw down process induces trading signal, will you still follow the trading signal to cut the lost? Trading and value sometime, I think, maybe it like a double edge of sword? Just curious of some thoughts.

 

When system is against you, defensive strangety is working well, but when system is in the favor of cooperated with you, will you still following this rule? "missing ANY signals is big no no." Thanks and you have a great day.:missy:

Share this post


Link to post
Share on other sites

" If all of traders follow the rules, will system stop draw down process when enough lost occurred at -1/3 position since eveyone are so smart?"

eveyone here are not so smart enough to understand what you just said :?:

applying pure honey technologies in sugar land yet? ;)

 

Generally -

Rule trading is not system trading.

True system trading and discretionary trading - mutually exclusive. Period.

Ie if any discretion is applied, it’s no longer system trading

Ie The only important value in system trading is to do everything you can to avoid missing signals... in good system trading you will still inevitably miss signals, but never because you 'decided' to...

So to answer your question - yes, in system trading, I will “still follow the trading signal” even when it conflicts with my ‘values’

 

When the system is working for you is THE time when you for sure do not want to be missing signals...

bcse for some systems - especially ‘truer’ trend systems - missing just one trade (that murphy happens to be an outlier) can ‘ruin’ a whole year of the system’s life. Been there, done that. It's not so stark for other types of systems, but missing signals / temporarily discretionarily turning it off still inevitably degrades the bottom line...

 

Good system design does strictly control risk per trade. However drawdowns and risk per trade are ‘difernt parts of the aminal’.

 

hope this clarifies. Have a good one

Share this post


Link to post
Share on other sites

Thanks for your comments. However I may not completely agree with you.

"The only important value in system trading is to do everything you can to avoid missing signals... " I just wonder if system is again you, it might put you under more risk if you just purely follow the signal, in an interactive system.:missy:

It might be riskier that you were cooperated to "lost" more if you just follow the signal rules if market were against you. Our eyes and feelling are always eay be trapped...Maybe. Just for fun.

Share this post


Link to post
Share on other sites
Thanks for your comments. However I may not completely agree with you.

"The only important value in system trading is to do everything you can to avoid missing signals... " I just wonder if system is again you, it might put you under more risk if you just purely follow the signal, in an interactive system.:missy:

It might be riskier that you were cooperated to "lost" more if you just follow the signal rules if market were against you. Our eyes and feelling are always eay be trapped...Maybe. Just for fun.

 

Rule trading is not system trading.

Discretionary trading is not system trading.

Share this post


Link to post
Share on other sites

Hi, still have question to ask. Is System trading using rules to trade? The other is "time". Sometime signals appeared at low time frame, but it disapperred on anther time frame. For example, the signal showed up in 5 minutes but dissappeared in 1hr time frme. If you have set up at price, then you might interact with this signal. But afterward, in 1Hr, you found you are one of the contributers for the lost. How do you deal with time issue on system trading regarding to the singal issue you just mentioned. Thanks.

Share this post


Link to post
Share on other sites

You are not providing enough information for a response. A 20% DD for a strategy that provides 100% per year vs 8% per year would be very different. Also, is that DD for one day, one month or one year. What is the asset class you are trading?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • ELV Elevance Health stock, watch for an upside gap breakout at https://stockconsultant.com/?ELV
    • ORLY OReilly Automotive stock, nice top of range breakout, from Stocks to Watch at https://stockconsultant.com/?ORLY
    • Date: 28th March 2025.   Market Selloff Deepens as Tariff Concerns Weigh on Investors     Global stock markets extended their losing streak for a third day as concerns over looming US tariffs and an escalating trade war dampened investor sentiment. The flight to safety saw gold prices surge to a record high, underscoring growing risk aversion. Stock Selloff Intensifies The MSCI World Index recorded its longest losing streak in a month, while Asian equities saw their sharpest decline since late February. US and European stock futures also signalled potential weakness, while cryptocurrency markets retreated and bond yields edged lower. Investors are scaling back their exposure ahead of President Donald Trump’s expected announcement of ‘reciprocal tariffs’ on April 2. His latest move to impose a 25% levy on all foreign-made automobiles has sparked fresh concerns over inflation and economic growth, prompting traders to reassess their strategies. Investor Strategies Shift Market experts are adjusting their portfolios in anticipation of heightened volatility. ‘It’s impossible to predict Trump’s next move,’ said Xin-Yao Ng of Aberdeen Investments. ‘Our focus is on companies that are less vulnerable to tariff policies while taking advantage of market dips to find value opportunities.’ Yield Curve Signals Economic Concerns In the bond market, the spread between 30-year and 5-year US Treasury yields widened to its highest level since early 2022. Investors are bracing for potential Federal Reserve rate cuts if economic growth slows further. Long-term Treasury yields hit a one-month peak as inflation risks tied to tariffs spurred demand for higher-yielding assets. Boston Fed President Susan Collins noted that while tariffs may contribute to short-term price increases, their long-term effects remain uncertain. Gold Hits Record High as Safe-Haven Demand Rises Amid market turbulence, gold prices soared 0.7% on Friday, reaching an all-time high of $3,077.60 per ounce. Major banks have raised their price targets for the precious metal, with Goldman Sachs now forecasting gold to hit $3,300 per ounce by year-end. Looking Ahead As investors digest economic data showing US growth acceleration in Q4, attention will turn to Friday’s release of the personal consumption expenditures (PCE) price index—the Federal Reserve’s preferred inflation measure. This data will be critical in shaping expectations for future Fed policy moves. With markets on edge and trade tensions escalating, investors will closely monitor upcoming developments, particularly Trump’s tariff announcement next week, which could further dictate market direction.   Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Andria Pichidi HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Crypto hype is everywhere since it also making new riches as well, i however trade crypto little as compared to other forex trading pairs.
    • The ewallets can be instant withdrawals like skrill etc or they can also pay through crypto but not tested their crypto withdrawals so far.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.