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Multi market drawdown
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Multi market drawdown

  #11 (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
Thanks: 6 given, 3 received

Drawdown

The systems that I trade are lowly correlated by design. I'm only day trading one contract each on the QM, EC, US, ER, and ES. Although the ES I trade a couple of different systems and time frames, so I could potentially have more than one ES contract on.

I have factored in slippage and commission of $25.00 - I'm not sure that it is applicable to each market (maybe help here). The systems are trend/counter-trend, gap fill and are all day trade systems. My back tested results over 3,716 trades show a max dd percentage, 9.723%. I trade on the TradeStation platform with their commission and margin structure.

The reason I trade the portfolio is to minimize the drawdown of any one particular system at any given time. It would seem to me that based on a some of the feedback - that I'm looking at it the proper way as a portfolio and not measuring the drawdown of individual systems and stopping trade of that individual system when we're in a drawdown.

This really has turned into a very interesting discussion with great points of view - I appreciate everyone's opinions.

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  #12 (permalink)
Member
Australia
 
Futures Experience: Advanced
Platform: Self-made, Multicharts, AmiBroker
Favorite Futures: Stock, Futures, Forex
 
Posts: 32 since Nov 2010
Thanks: 7 given, 21 received

Commision:

The commision depends on what kind of trading style. If you don't do any scaling in or scaling out (e.g. enter X position, and out X position), the round-turn commision normally would be $25 * 2 = $50 (but this depends on what broker you use). This excluding spread because normal historical data only use bid price, therefore, if you might want to convert (the average usual spread of your market) to spread cost where:

Spread cost = (spread tick difference) * (tick value) * (your position)

The transaction cost = Spread cost + Commision + Slippage (This is quite unpredictable, so you might want to guess prudently)

WARNING: If your system only "barely" profiting or break even, don't trade it because usually live trade result in much worse result.


About your drawdown:

Keep in mind that you should back-test inside the "context". For example, when you say 9% dd, the question is:

1. using what risk percentage per trade?
2. What's the annual profit?
3. Do you realise you could make the drawdown to 1% by dividing your position with 9 (that is assuming you are not under-capitalise)?
4. How's the system performing compared to benchmark of the common systems of similar types?
5. What's the reward/risk ratio of that system?

I assume, you have accepted these systems as in, these systems really suited to your personality, if they don't, I suggest you to return to square one. No offense, I'm just saying this for your own good.

I hope that helps.

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  #13 (permalink)
Elite Member
Israel
 
Futures Experience: Intermediate
Platform: NinjaTrader
Broker/Data: pfg
Favorite Futures: eminis
 
Posts: 323 since Jun 2009
Thanks: 6 given, 206 received



Quoting 
The commision depends on what kind of trading style. If you don't do any scaling in or scaling out (e.g. enter X position, and out X position), the round-turn commision normally would be $25 * 2 = $50

The commission does not depends on trading style, its per contract! So I you scale in/out you enter with 2 or more contracts. For each you pay the same commission. For what instrument do you pay 50$? I pay less then 5$.

If you trade Forex then by all means test it with bid and ask data.

Quoting 
3. Do you realize you could make the drawdown to 1% by dividing your position with 9 (that is assuming you are not under-capitalise)?

Pls explain how you get to it??? My calculation says that if you divide your position the DD stays the same.

Quoting 
I don't really know whether there's anything useful in assessing risk/reward ratio for single trade.

If you have a system with constant stop loss and profit target then you know your RR and its the same for each trade. But if it is variable like Bollinger length or what ever, then you need to decide if you take the trade or not depending on the RR. Thats the only RR that is of any help. Before entering a trade!

Quoting 
%Win = StopLoss_Threshold / (StopLoss_Threshold + ProfitTaking_Threshold)

You describe coin flip with 1:1 RR. I hope you didn't run to patent Biro with it.

Quoting 
Therefore, don't be misled by those guy who claim their system 90% or 95%.

A trade is made of two ratios: Risk/Reward and %Win. There is no point of talking about one ratio without the other. I made a RRCalculator (its in download section). It gives you the means to compare setups with different ratios.

Hope it helps.

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  #14 (permalink)
Member
Australia
 
Futures Experience: Advanced
Platform: Self-made, Multicharts, AmiBroker
Favorite Futures: Stock, Futures, Forex
 
Posts: 32 since Nov 2010
Thanks: 7 given, 21 received


baruchs View Post
The commission does not depends on trading style, its per contract! So I you scale in/out you enter with 2 or more contracts. For each you pay the same commission. For what instrument do you pay 50$? I pay less then 5$.

If you trade Forex then by all means test it with bid and ask data.

Pls explain how you get to it??? My calculation says that if you divide your position the DD stays the same.

If you have a system with constant stop loss and profit target then you know your RR and its the same for each trade. But if it is variable like Bollinger length or what ever, then you need to decide if you take the trade or not depending on the RR. Thats the only RR that is of any help. Before entering a trade!

You describe coin flip with 1:1 RR. I hope you didn't run to patent Biro with it.

A trade is made of two ratios: Risk/Reward and %Win. There is no point of talking about one ratio without the other. I made a RRCalculator (its in download section). It gives you the means to compare setups with different ratios.

Hope it helps.

Alright, alright mate, you win. So, have it your way. Peace!

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