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Equity Curve Trading
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Equity Curve Trading

  #1 (permalink)
Trading Apprentice
Atlanta GA
 
Futures Experience: Intermediate
Platform: TradeStation
Favorite Futures: ES, TF, EMD, CL, QM
 
dgresens's Avatar
 
Posts: 17 since Dec 2010
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Equity Curve Trading

Hello -

Can anyone suggest on an equity curve, when plotting a moving average and stopping trades once the average is broken, what is an appropriate time frame, 10 trades, 20 trades - how many trades is a good average? I know that it is dependent on my risk tolerance and other factors - I'm just interested in what your using....

Also, what type of average...simple, weighted, exp, etc.

Thanks!

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  #3 (permalink)
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dgresens View Post
Hello -

Can anyone suggest on an equity curve, when plotting a moving average and stopping trades once the average is broken, what is an appropriate time frame, 10 trades, 20 trades - how many trades is a good average? I know that it is dependent on my risk tolerance and other factors - I'm just interested in what your using....

Also, what type of average...simple, weighted, exp, etc.

Thanks!

The MSA program I told you about for fixed ratio also allows you to see how using an equity curve effects your results.

I am not saying an equity curve cannot be useful but I have never found it to positively effect my results and at times caused my draw downs to actually be higher. So I do not use one but key is to test it on your results as it may or may not help.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #4 (permalink)
Elite Member
Paris, France
 
Futures Experience: Advanced
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I don't think the type of moving average is very important.

However, I've observed few important features.

First, if your system has a high winning % (> 60% for example) you'd be better off increasing size or resuming trading once the curve falls below the MA because you're closer to the next winning trade.

However, if you're trading a trend following system with a low winning %, this kind of money management is much riskier because you can have long losing streaks. Inversely, if you decrease size or stop trading once your curve falls below its average you might miss or under size the big winner you've been waiting for so long.

Also, you can run significance tests for autocorrelation of returns to see if losing / winning trades come in streaks.

The bottom line is to be able to determine when your winning trades have a better than average chance of happening and betting accordingly. This can be very powerful but depends heavily on your system and market context.

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