If you look at the ATR 20 for the max low point down draws of
the past. You will find that the current trade is worst than
those of the past. A good formula to keep things in perspective
is: low point down draw/ATR 20
Interesting post, fishbait. Your
comment is backed up by comparing the VIX:
Specifically, date of previous
largest drawdown (10.04%) was 03/06/09.
VIX O/H/L/C data on that date were
a whopping 50/52/48/49 (using round numbers)
Yesterday’s low was the point of
maximum drawdown for the current trade, which I calculate as
10.26%
VIX O/H/L/C data yesterday were
28/39/28/32 (using round numbers)
So, current trade represents a
slightly greater drawdown but on much reduced volatility – in other
words, the trade is even more stretched to the downside (in both
senses of the word) than perhaps we first thought.
The potential good news on the
horizon is our old and timeless friend Mr Mean Reversion. If price
snaps back to this mythical mean with even more ferocity than the
aforementioned trade of Feb-Mar 09, we could be looking at a winner
of greater than the c. 20% profit that that trade ultimately
achieved.
Fingers crossed...
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low point down draw
Historical Draw Downs to the system
Posted by fishbait on 6th of Aug 2011 at 11:53 am
If you look at the ATR 20 for the max low point down draws of the past. You will find that the current trade is worst than those of the past. A good formula to keep things in perspective is: low point down draw/ATR 20
Therefore :2/29/09 = 10%/3.05= 3.27 7/28/11=10%/2.27= 4.40
low point draw down
Posted by philosoraptor on 6th of Aug 2011 at 01:10 pm
Interesting post, fishbait. Your comment is backed up by comparing the VIX:
Specifically, date of previous largest drawdown (10.04%) was 03/06/09.
VIX O/H/L/C data on that date were a whopping 50/52/48/49 (using round numbers)
Yesterday’s low was the point of maximum drawdown for the current trade, which I calculate as 10.26%
VIX O/H/L/C data yesterday were 28/39/28/32 (using round numbers)
So, current trade represents a slightly greater drawdown but on much reduced volatility – in other words, the trade is even more stretched to the downside (in both senses of the word) than perhaps we first thought.
The potential good news on the horizon is our old and timeless friend Mr Mean Reversion. If price snaps back to this mythical mean with even more ferocity than the aforementioned trade of Feb-Mar 09, we could be looking at a winner of greater than the c. 20% profit that that trade ultimately achieved.
Fingers crossed...