Equity curve trading - possible? - futures io
futures io



Equity curve trading - possible?


Discussion in Psychology and Money Management

Updated
      Top Posters
    1. looks_one DarkPoolTrading with 5 posts (6 thanks)
    2. looks_two Big Mike with 2 posts (2 thanks)
    3. looks_3 drolles with 2 posts (2 thanks)
    4. looks_4 liquidcci with 2 posts (5 thanks)
      Best Posters
    1. looks_one mokodo with 5 thanks per post
    2. looks_two liquidcci with 2.5 thanks per post
    3. looks_3 DarkPoolTrading with 1.2 thanks per post
    4. looks_4 drolles with 1 thanks per post
    1. trending_up 11,936 views
    2. thumb_up 22 thanks given
    3. group 13 followers
    1. forum 19 posts
    2. attach_file 4 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 125,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

Equity curve trading - possible?

(login for full post details)
  #1 (permalink)
 DarkPoolTrading 
PTA, Gauteng
 
Experience: Advanced
Platform: Self built + Sierra + TWS
Trading: Stocks and Options
 
DarkPoolTrading's Avatar
 
Posts: 1,036 since May 2012
Thanks: 1,244 given, 1,321 received

Hi All,

So I am finding that equity curve trading is not as easy as it sounds. The concept sounds simple enough - Stop trading when your equity curve drops below a moving average (or some other measurement). Resume trading when it once again rises above a moving average. This in theory should reduce your drawdowns. Well, from what i've found this is not true. Please note that this is only ever possible with a mechanical system. Trading your equity curve is not possible if you're a discretionary trader.

I have developed a profitable system which I am busy backtesting. It has a good looking equity curve and reasonably infrequent significant drawdowns. The problem is that the maximum drawdown is higher than what im willing to accept. So i've been working on several ways to filter trades based on the equity curve in an effort to reduce the drawdowns.

The purpose here is not to increase profit, but rather to reduce drawdown.

I have tried several variations of the below:
  1. Dont trade when the equity curve is below a certain moving average
  2. Dont trade when the RSI of the equity curve is below a certain value (I had high hopes for this one, since the idea is that trades would only be taken when the momentum of the equity curve is up)
  3. If the drawdown reaches a certain value, stop trading until it has recovered a certain part of the drawdown. eg: If the drawdown exceeds 200 points, only start trading once it has recovered 100 points from the max drawdown. The idea being that you would stop trading during a string of losses and only start again once a certain percentage gain from the max drawdown has occured.
  4. Various combinations of the above eg: RSI combined with MA. or: MA combined with max drawdown etc

Basically I have come to three realisations:
  1. I am unable to beat the equity curve by trying to filter out the drawdowns.
  2. For the most part, I am unable to reduce the drawdowns
  3. Trading the equity curve results in even bigger drawdowns in many cases. This is because you miss many of the big positive trades and by the time you start trading again, you run into a string of losers which results in a bigger drawdown than what you would have had.

My feeling is that a system with a high win rate may benefit from trading the equity curve. However I have been unable to backtest this because my system does not have a high win rate. A trend following system with a lower win rate (but still a positive system), cannot benefit from trading the equity curve in my opinion.

Have any of you managed to sucessfully reduce your drawdowns by trading your equity curve?
Was this on a trend following system or something else?

Have you performed back testing on this? I ask because occasionally filtering trades based on your equity curve works, but after testing 5 years worth of data using a profitable system, I have not been able to come out with a better solution than simply taking every single trade that the system generates.

cheers.

Follow me on Twitter Started this thread Reply With Quote
The following 5 users say Thank You to DarkPoolTrading for this post:

Journal Challenge April 2021 results:
Competing for $1800 in prizes from Jigsaw
looks_oneMaking a Living with the Microsby sstheo
(616 thanks from 61 posts)
looks_twoSalao's Journalby Salao
(160 thanks from 29 posts)
looks_3Learning to Profit - A journey in algorithms and optionsby Syntax
(115 thanks from 27 posts)
looks_4Deeteeís DAX Trading Journal (time based)by Deetee
(94 thanks from 30 posts)
looks_5Maybe a little bit different journalby Malykubo
(53 thanks from 32 posts)
 
Best Threads (Most Thanked)
in the last 7 days on futures io
I finally blew up an account
405 thanks
The Crude Dude Oil Trading System
81 thanks
Spoo-nalysis ES e-mini futures S&P 500
64 thanks
The tiyfTradePlanFactory indicator
25 thanks
Building a Crypto Mining Rig
19 thanks
 
(login for full post details)
  #3 (permalink)
 DarkPoolTrading 
PTA, Gauteng
 
Experience: Advanced
Platform: Self built + Sierra + TWS
Trading: Stocks and Options
 
DarkPoolTrading's Avatar
 
Posts: 1,036 since May 2012
Thanks: 1,244 given, 1,321 received


I have attached two images of some of my results

Attached Thumbnails
Click image for larger version

Name:	Running total.JPG
Views:	249
Size:	115.9 KB
ID:	76326   Click image for larger version

Name:	drawdown.JPG
Views:	179
Size:	134.7 KB
ID:	76327  
Follow me on Twitter Started this thread Reply With Quote
The following user says Thank You to DarkPoolTrading for this post:
 
(login for full post details)
  #4 (permalink)
 liquidcci 
Austin, TX
 
Experience: Master
Platform: ninjatrader, r-trader
Trading: NQ, CL
 
liquidcci's Avatar
 
Posts: 866 since Jun 2011
Thanks: 610 given, 1,077 received


DarkPoolTrading View Post
Hi All,

So I am finding that equity curve trading is not as easy as it sounds. The concept sounds simple enough - Stop trading when your equity curve drops below a moving average (or some other measurement). Resume trading when it once again rises above a moving average. This in theory should reduce your drawdowns. Well, from what i've found this is not true. Please note that this is only ever possible with a mechanical system. Trading your equity curve is not possible if you're a discretionary trader.

I have developed a profitable system which I am busy backtesting. It has a good looking equity curve and reasonably infrequent significant drawdowns. The problem is that the maximum drawdown is higher than what im willing to accept. So i've been working on several ways to filter trades based on the equity curve in an effort to reduce the drawdowns.

The purpose here is not to increase profit, but rather to reduce drawdown.

I have tried several variations of the below:
  1. Dont trade when the equity curve is below a certain moving average
  2. Dont trade when the RSI of the equity curve is below a certain value (I had high hopes for this one, since the idea is that trades would only be taken when the momentum of the equity curve is up)
  3. If the drawdown reaches a certain value, stop trading until it has recovered a certain part of the drawdown. eg: If the drawdown exceeds 200 points, only start trading once it has recovered 100 points from the max drawdown. The idea being that you would stop trading during a string of losses and only start again once a certain percentage gain from the max drawdown has occured.
  4. Various combinations of the above eg: RSI combined with MA. or: MA combined with max drawdown etc

Basically I have come to three realisations:
  1. I am unable to beat the equity curve by trying to filter out the drawdowns.
  2. For the most part, I am unable to reduce the drawdowns
  3. Trading the equity curve results in even bigger drawdowns in many cases. This is because you miss many of the big positive trades and by the time you start trading again, you run into a string of losers which results in a bigger drawdown than what you would have had.

My feeling is that a system with a high win rate may benefit from trading the equity curve. However I have been unable to backtest this because my system does not have a high win rate. A trend following system with a lower win rate (but still a positive system), cannot benefit from trading the equity curve in my opinion.

Have any of you managed to sucessfully reduce your drawdowns by trading your equity curve?
Was this on a trend following system or something else?

Have you performed back testing on this? I ask because occasionally filtering trades based on your equity curve works, but after testing 5 years worth of data using a profitable system, I have not been able to come out with a better solution than simply taking every single trade that the system generates.

cheers.

I have personally never been able to make trading with an equity curve work. I often find reduces profit and increases draw downs. That being said I am sure there are those who use equity curves and they help. I think it depends on strategy etc.

"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."
Reply With Quote
The following user says Thank You to liquidcci for this post:
 
(login for full post details)
  #5 (permalink)
 Nicolas11 
near Paris, France
 
Experience: Beginner
Platform: -
Trading: -
 
Nicolas11's Avatar
 
Posts: 1,071 since Aug 2011
Thanks: 2,232 given, 1,755 received

Hi,

This thread may also interest you:


Nicolas

Visit my futures io Trade Journal Reply With Quote
 
(login for full post details)
  #6 (permalink)
 Luger 
Nashville, TN
 
Experience: Intermediate
Platform: NinjaTrader
Broker: IB
Trading: NQ ES
 
Posts: 468 since Feb 2011
Thanks: 323 given, 543 received

I have not really toyed with the idea of working the equity curve myself, though i have read some threads on it. Were it me trying to make this happen then I would be most likely to try using a bollinger band approach.

Inside the bands = standard contract amount
Above the upper band = reduce contract size
Below the lower band = increase contract size

You would then be taking action against the lower probability trade sequences that are present in trading.

Reply With Quote
The following user says Thank You to Luger for this post:
 
(login for full post details)
  #7 (permalink)
 DarkPoolTrading 
PTA, Gauteng
 
Experience: Advanced
Platform: Self built + Sierra + TWS
Trading: Stocks and Options
 
DarkPoolTrading's Avatar
 
Posts: 1,036 since May 2012
Thanks: 1,244 given, 1,321 received


Luger View Post
I have not really toyed with the idea of working the equity curve myself, though i have read some threads on it. Were it me trying to make this happen then I would be most likely to try using a bollinger band approach.

Inside the bands = standard contract amount
Above the upper band = reduce contract size
Below the lower band = increase contract size

You would then be taking action against the lower probability trade sequences that are present in trading.

Using bollinger bands is an interesting idea, I think I might do some tests on that. However im not sure I agree with your suggested approach. If you were to increase contract size below the lower band, you would essentially be increasing exposure when there is a large increase in downward volatily of your equity curve. Surely that will be a recipe for disaster? Never the less, some sort of investigation around this may be worth while.

I think im still leaning towards the idea that equity curve trading is not possible with a trendfollowing system. This is because there is a lower winning percentage, but with big wins. That means you need to be in the market when those big wins come around.

On the other hand with a higher winning percentage system, but with small wins equity curve trading may be possible. This would be because a string of losses would be abnormal and you're not going to miss out on any big wins because your system is designed around many small wins.

Any other thoughts on this?

Follow me on Twitter Started this thread Reply With Quote
 
(login for full post details)
  #8 (permalink)
 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
Experience: Advanced
Platform: Custom solution
Trading: Futures & Crypto
 
Big Mike's Avatar
 
Posts: 50,068 since Jun 2009
Thanks: 32,534 given, 98,492 received

I think a smooth EC is very important. I've asked @NinjaTrader to make it possible in NT8 to optimize based on a linear equity curve, with the smallest deviation from optimal as an ideal result.

Counter-trend or mean reversion systems typically have smoother EC's in my experience. But with trend or counter-trend, the real key is scaling in my opinion.

I don't believe you listed what product you are trading, but an idea is to trade a different class of product with less risk per dollar, so you can carry more size and scale in and out.

For example, if trading ES futures and you don't want to trade up to 10 lots at a time (just an example), then consider trading SPY ETF instead. If trading 6E, consider trading M6E instead. etc.

Mike

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/

Visit other sites? Please spread the word about your experience with our community!
Follow me on Twitter Visit my futures io Trade Journal Reply With Quote
The following 2 users say Thank You to Big Mike for this post:
 
(login for full post details)
  #9 (permalink)
 DarkPoolTrading 
PTA, Gauteng
 
Experience: Advanced
Platform: Self built + Sierra + TWS
Trading: Stocks and Options
 
DarkPoolTrading's Avatar
 
Posts: 1,036 since May 2012
Thanks: 1,244 given, 1,321 received

Yes I agree completely, a smooth EC is critical. That is why I will not even consider trading this system live in its current form. It will be great if NT8 allows for integration of EC testing into backtesting / optimisation.

I trade the ALSI (It's the main index future in South Africa based on the top40 companies). Because of the time zone I am in, I am in some part limited by that. In general I am able to trade South Africa and European (UK, Germany etc) markets. Because of that the products I have available to trade are fairly limited in terms of trading mini sized contracts (at least that im aware of). I agree completely though, that scaling down rather that not trading is a valid approach. Im just not sure of any mini sized contracts in a time zone that Ill be awake for.

Follow me on Twitter Started this thread Reply With Quote
 
(login for full post details)
  #10 (permalink)
 grausch 
Luxembourg, Luxembourg
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Stocks
 
Posts: 491 since May 2012
Thanks: 1,641 given, 1,149 received



DarkPoolTrading View Post
Yes I agree completely, a smooth EC is critical. That is why I will not even consider trading this system live in its current form. It will be great if NT8 allows for integration of EC testing into backtesting / optimisation.

I trade the ALSI (It's the main index future in South Africa based on the top40 companies). Because of the time zone I am in, I am in some part limited by that. In general I am able to trade South Africa and European (UK, Germany etc) markets. Because of that the products I have available to trade are fairly limited in terms of trading mini sized contracts (at least that im aware of). I agree completely though, that scaling down rather that not trading is a valid approach. Im just not sure of any mini sized contracts in a time zone that Ill be awake for.

How is the liquidity on the ALMI? I remember looking at them when they just started, but daily volume was sometimes 0. However, they are 1/10th the size of the ALSI and would help with scaling in/out.

I believe there is now an active market maker on the ALMI, so at least you will be able to trade them although spreads might not be as good as the ALSI.

Edit: Actually when the ALMI started daily volume was mostly 0.

Reply With Quote
 
(login for full post details)
  #11 (permalink)
 DarkPoolTrading 
PTA, Gauteng
 
Experience: Advanced
Platform: Self built + Sierra + TWS
Trading: Stocks and Options
 
DarkPoolTrading's Avatar
 
Posts: 1,036 since May 2012
Thanks: 1,244 given, 1,321 received

The ALMI actually is becoming a semi-viable trading option. Up until about 3 months ago there was only one market maker and their spread was set at 7points either side of the ALSI, which was huge! Thankfully now there seems to be another market maker and they seem to consistently be the same (or within a point) of the ALSI.

The only problem is that the volume still isn't very high (it's about 1500 deals per day). So what is needed is that you chart the ALSI, but make the trades on the ALMI. You also need to either have mental stops, or alerts when price meets a certain level on the ALSI. This is because the ALMI might not trade until its way past your stop.

Another thing is that the brokerage to trade the ALMI is generally the same as the ALSI, except the ALMI contract size is 1/10th the size. Basically what that means is you need at least a 30point move to overcome your round trip costs. So scalping is out of the question generally.

However other than that, the ALMI is slowly becoming a more viable option. Or at least a good learning ground before moving up to the ALSI.

thanks.

Follow me on Twitter Started this thread Reply With Quote
 
(login for full post details)
  #12 (permalink)
 mokodo 
Bridgwater, UK
 
Experience: Beginner
Platform: Ninjatrader
Broker: MB Trading
Trading: Forex
 
mokodo's Avatar
 
Posts: 384 since Jun 2011
Thanks: 525 given, 346 received

Yes I do this but I do not use it to turn trading on and off - as you have found switching off may mean missing big moves, (if that is your trading style). I've done tests for strategies that rely on few big winners its always less profitable.

I use it to influence my % risk. The closer my equity curve gets to an MA of my last 20 trades the less risk I put on. I find it helps with keeping me trading live so I can get back in sync, if I'm out of sync.

High frequency strategies that take numerous small trades may be more suited to the equity curve/equity curve MA cross approach. Or if you have a purely mechanical approach where you tweak parameters via Rolling Walk Foward Analyisis, you could use the approach to know when to re-optimise.

And in my book anything that keeps the focus on risk is a good.

Best of luck with your project.

Visit my futures io Trade Journal Reply With Quote
The following 5 users say Thank You to mokodo for this post:
 
(login for full post details)
  #13 (permalink)
dryg
France
 
 
Posts: 38 since May 2012
Thanks: 5 given, 17 received


DarkPoolTrading View Post
Hi All,

So I am finding that equity curve trading is not as easy as it sounds. The concept sounds simple enough - Stop trading when your equity curve drops below a moving average (or some other measurement). Resume trading when it once again rises above a moving average. This in theory should reduce your drawdowns. Well, from what i've found this is not true.

I agree with your finding and thanks for sharing them. Equity curve management is just another buzzword in the series of buzzwords invented by talking heads in this area. An example: if the equity drops below it's moving average because of choppy action and then the system misses the trend signal, when the simulated equity goes above the average the system misses half or more of the gains. That is disaster. You either believe in your system or not. This is what it is all about. You can't fix a lemon by squeezing it.

Reply With Quote
The following user says Thank You to dryg for this post:
 
(login for full post details)
  #14 (permalink)
 bullsandthebears 
boston, ma / usa
 
Experience: Intermediate
Platform: ninja , metastock, multicharts, TDA, tradestation
Broker: Tradestation, Esignal, OptionsExpress, MBTrading, Ameritrade
Trading: spy,sector spyders
 
bullsandthebears's Avatar
 
Posts: 67 since Jul 2012
Thanks: 9 given, 14 received

I have not heard mention about utililizing independent strat equity, nothing to do with the strat itself, a out of market profitable or not strat wont trade on a curve break , but other market style strats should pick up when the other leaves off. same stock, multi stat setups specific to our common market conditions, ie; trend up and down, atr range , speed an allotted accounts to trade equity independently, ... 20 great strats do not trade all the time regardless yet can be at the ready as market conditions permit, problems associated with curve is reoptimising the proper curve and when, yet a tight fit strat should hold a tight fit curve verses a 1 strat fits all bit, will be testing multi equity curve in near term, there is a strat picker dll out there the impliments stats bases on curve setting in paper mode and sets it live once equity curve conditions are met, sets it to sleep when broke back into paper mode for re analysis. not rocket science, i curve 20 different charts same strat different settings independenly, i do not automate paper or live account switch, next on my todo list. hope this was some insight beyond the perfect strat to beat the curve, it more like how one curve can help the other. a strat must run live or paper 24 hrs a day , your strat is your servant keep it serving you or thats when you miss the next big move.

Not a vendor, just a trader. I do not sell anything. Current studies involve EasyLanguage, Money Management and Technical Analysis. Do Enjoy: Fibs, S / R's , Eliotts, Cycles, Trends , Skews. Not Enjoy: fundamentals, Main St Media . It's all about keeping your emotions out of trading and work a system. Appreciate all insight as will be returned. Scotty B.
Visit my futures io Trade Journal Reply With Quote
 
(login for full post details)
  #15 (permalink)
 liquidcci 
Austin, TX
 
Experience: Master
Platform: ninjatrader, r-trader
Trading: NQ, CL
 
liquidcci's Avatar
 
Posts: 866 since Jun 2011
Thanks: 610 given, 1,077 received

I have been experimenting with an equity curve. I had stated previously never could get an equity curve to benefit my trading. But I recently added some new strategies to my trading mix that are significantly upping the number of trades I take. I am finding an equity curve to be of great value. Some key things at least in regards to my situation. My system does not rely a few big winners for profit. My profits are spread out over a lot of trades so going to SIM mode when below the curve and live when above works well. I think a system that relies on a few big winners could have problems because if you miss that big trade while in SIM can really skew your results. I have never liked a system that relied on a few big winners anyway because there are many things that can cause you to miss that big trade. A system that spreads profits out is much more forgiving imo.

Will give up some profit using a curve but less draw deep draw downs. Even a good system when market conditions change can have sustained draw downs. Does not mean system has gone bad but market conditions just are not right for the system. A curve can allow you to wait out those conditions without destroying your account. There is possibility to get stuck going above and below the curve every other trade which can cause some problems but I have found that is less of a problem than potential for a sustained draw down without a curve. I have also found curve does not work well unless a system takes a good number of trades. A system that takes a small number of trades at least in my experience can actually be hurt by using a curve.

There are some mental hurdles to overcome if using a curve. Main one is it is hard to go to SIM when below the curve. Only way you get above curve is to have some trades win in SIM. So that means you will will be in SIM on some profitable trades. The feeling of dang I missed a winning trade must be dealt with. I deal with it by looking at my overall system and not getting caught placing to much importance on individual trades.

If considering a curve treat it like everything else and run your back test results through it to see how it effects your system as not every system will benefit and it can even hurt.

"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."
Reply With Quote
The following 4 users say Thank You to liquidcci for this post:
 
(login for full post details)
  #16 (permalink)
 Porsche 
Germany
 
Experience: Advanced
Platform: Mathematica, thinkorswim
Broker: tastyworks, thinkorswim, Mathematica
Trading: ES, CL, 6E
 
Porsche's Avatar
 
Posts: 28 since Apr 2012
Thanks: 59 given, 17 received


DarkPoolTrading View Post
Using bollinger bands is an interesting idea, I think I might do some tests on that. However im not sure I agree with your suggested approach. If you were to increase contract size below the lower band, you would essentially be increasing exposure when there is a large increase in downward volatily of your equity curve. Surely that will be a recipe for disaster? Never the less, some sort of investigation around this may be worth while.

I think im still leaning towards the idea that equity curve trading is not possible with a trendfollowing system. This is because there is a lower winning percentage, but with big wins. That means you need to be in the market when those big wins come around.

On the other hand with a higher winning percentage system, but with small wins equity curve trading may be possible. This would be because a string of losses would be abnormal and you're not going to miss out on any big wins because your system is designed around many small wins.

Any other thoughts on this?

There is an article by Thomas Stridsman titled "Martingale Bet Sizing in Drawdowns" covering this approach of increasing the risk of a trendfollowing strategy slightly during drawdowns. (Google will lead you to the pdf.)

For the strategy in the article it helped to shorten the length of the longest drawdown but didn't reduce the deepness of drawdowns.

Reply With Quote
 
(login for full post details)
  #17 (permalink)
 drolles 
London, UK
 
Experience: Beginner
Platform: TradeLink, OpenQuant, considering anything that works...
Trading: if it trades...
 
Posts: 94 since Oct 2010
Thanks: 24 given, 38 received


Big Mike View Post
I think a smooth EC is very important. I've asked @NinjaTrader to make it possible in NT8 to optimize based on a linear equity curve, with the smallest deviation from optimal as an ideal result.

Mike, thanks for that. Can I just check, isn't this very close to looking for the highest Sharpe ratio?

Reply With Quote
 
(login for full post details)
  #18 (permalink)
 drolles 
London, UK
 
Experience: Beginner
Platform: TradeLink, OpenQuant, considering anything that works...
Trading: if it trades...
 
Posts: 94 since Oct 2010
Thanks: 24 given, 38 received

Thanks for starting this thread.

As usual I was Googling this and it brought be back to futures.io (formerly BMT) as one of the members had already attacked the problem. Thanks very much.

I have a couple of questions and share some experience / results.

Would those that have implemented equity curve analysis mind sharing the implementation method on NT? Even if it isnít the code, a bullet point summary of the steps to implement?
As per my post to Mike, isnít looking for a smooth equity curve just the same as looking for a high Sharpe ratio?
As anyone played with trade dependency (see my post here and this short piece)?

Trade dependency
I did a little bit of research into this a while ago, I was varying the size of risk based on the previous trade. That is, if the previous trade was +ve then bet double the current percentage. If the previous trade is Ėve then bet half the current percentage. I didnít find it improved performance at all.

Daily PnL Filters
Iíve had some success with Daily Max loss filters in backtest. However, implemented in a way that says donít scaling into any further positions with mean-revision strategies. However, Iíve seen negative results when making the system aggressively close positions when losses are occurring (with mean-revision systems). My theory here is that when we are aggressively closing trades, it is cutting off the possibility of the market reverting and reducing the losses. This isnít dissimilar findings from Ernie Chan I think (he mentions this in his first book).

When Ernie spoke at this the London Systematic Traders Club he mentioned that his updated approach (to be published in the next book) sounded similar as @mokodoís where he varies the size of his risk based on the performance of the system, taking risk off aggressively is the strategy starts to ďunder-performĒ.

This equity curve is a back test from 2008 Ė 2011 of ES with a mean revision system with no daily PnL Filter.


This equity curve is exactly the same system on exactly the same data with a Daily PnL filter that stops the opening of new trades when a threshold is breached.

Cheers,

drolles

Reply With Quote
The following 2 users say Thank You to drolles for this post:
 
(login for full post details)
  #19 (permalink)
 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
Experience: Advanced
Platform: Custom solution
Trading: Futures & Crypto
 
Big Mike's Avatar
 
Posts: 50,068 since Jun 2009
Thanks: 32,534 given, 98,492 received


drolles View Post
Mike, thanks for that. Can I just check, isn't this very close to looking for the highest Sharpe ratio?

No. Equity Curve is much more.

Please look here:


Mike

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/

Visit other sites? Please spread the word about your experience with our community!
Follow me on Twitter Visit my futures io Trade Journal Reply With Quote
 
(login for full post details)
  #20 (permalink)
 HitTheCity 
Melbourne
 
Experience: Intermediate
Platform: NinjaTrader
Trading: Forex
 
Posts: 104 since Apr 2012
Thanks: 78 given, 46 received


DarkPoolTrading View Post
I have attached two images of some of my results

That is by no means a bad equity curve, especially for a TF system. A few periods of ~breakeven, a couple of minor dips that are recovered from quickly. I'd begin sim trading that live right now to start seeing if live results are reflective or your backtest results.

Reply With Quote


futures io Trading Community Psychology and Money Management > Equity curve trading - possible?


Last Updated on March 3, 2013


Upcoming Webinars and Events

NinjaTrader Indicator Challenge!

Ongoing

Journal Challenge w/$1,800 in prizes!

May 7

The Cold Hard Truth: Maybe I Am Not Good Enough w/Chris Gray @ Earn2Trade

Elite only
     



Copyright © 2021 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada), info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts