Drawdown Monte Carlo Increase over time PROBLEM | Traders Hideout

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Drawdown Monte Carlo Increase over time PROBLEM

  #6 (permalink)

Trading Experience: Intermediate
Platform: Multichart
Favorite Futures: Gold
Posts: 26 since Aug 2016
Thanks: 22 given, 4 received


Thank you for respond GFIs1 ,

I am afraid we are talking about different things. I only refer to drawdowns.

My point is valid even for a live system that brings you a profit.

If you take 500 trades from a live profit system and forecast future likely drawdowns from this they will, for a 200 trade period, have a high risk of being above 50%.

The drawdown risk increases over time. This increase is same as for a diffusion process.

This has to do with the law of large numbers in probability theory.

The only way to control this seems to be position sizing. Using Safe-f.

But there might be other angles to this problem?


Kind regards


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