Posted by redrider20 on 6th of May 2011 at 04:13 pm
Anyone who trades this type of system is going to have to
identify what type of draw-down level you are comfortable
with. Some people may be comfortable with say a 15%
draw-down, while others might be OK with 25%. That is the
question you are going to have to ask yourself, & only you can
answer that question. You will experience draw-downs with a
reversion to the mean type of trading system like this.
Sometimes you'll see big draw-downs & really big ones if you're
using leveraged ETFs like SSO. I trade with another guy who
utilizes a similar type of system. It works like a charm if
you have a good plan & remain patient. Figure out where
your comfort zone is & adjust your position sizing
accordingly.
One more tip: When volatility increases, maybe reduce your
position size. Also, moving from the single to the multiple
entry system during times of high volatility can help.
Ok so if you are trading this system, the biggest loss in 16
years was 3.36% see #7 from the SPY System info page:
"7.Largest losing trade was -3.36% with the
average losing trade being only about 1%.
Note, for the Multi Entry
system, the largest losing trade was only -1.3%"
IF YOU TRADE THE SYSTEM AS OFFERED, THE DRAWDOWN IS IN REALITY
MEANINGLESS.
You only need to worry about draw downs if you are trading
futures or some other highly leverage or margined instrument. And
if you are, then you are beyond the parameters of this system and
MUST take full responsibility for any losses you incur.
Is it human nature that we won't accept a very good system
without messing around with it first? Or are we all so greedy that
we must find the maximum way to get the maximum return?
I say dittos to dougmil's post just before this one!!
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You Are Going To Have To Make An Important Decision
Posted by redrider20 on 6th of May 2011 at 04:13 pm
Anyone who trades this type of system is going to have to identify what type of draw-down level you are comfortable with. Some people may be comfortable with say a 15% draw-down, while others might be OK with 25%. That is the question you are going to have to ask yourself, & only you can answer that question. You will experience draw-downs with a reversion to the mean type of trading system like this. Sometimes you'll see big draw-downs & really big ones if you're using leveraged ETFs like SSO. I trade with another guy who utilizes a similar type of system. It works like a charm if you have a good plan & remain patient. Figure out where your comfort zone is & adjust your position sizing accordingly.
One more tip: When volatility increases, maybe reduce your position size. Also, moving from the single to the multiple entry system during times of high volatility can help.
Just a few suggestions to help take the edge off.
drawdowns? Ignore 'em
Posted by perthx on 6th of May 2011 at 04:55 pm
Ok so if you are trading this system, the biggest loss in 16 years was 3.36% see #7 from the SPY System info page:
"7.Largest losing trade was -3.36% with the average losing trade being only about 1%. Note, for the Multi Entry system, the largest losing trade was only -1.3%"
IF YOU TRADE THE SYSTEM AS OFFERED, THE DRAWDOWN IS IN REALITY MEANINGLESS.
You only need to worry about draw downs if you are trading futures or some other highly leverage or margined instrument. And if you are, then you are beyond the parameters of this system and MUST take full responsibility for any losses you incur.
Is it human nature that we won't accept a very good system without messing around with it first? Or are we all so greedy that we must find the maximum way to get the maximum return?
I say dittos to dougmil's post just before this one!!