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> I guess there are lots of ways around the problem: Trade an equity
> curve where the system shuts down once the cumulative losses since
> the last winner exceed some % of equity at the last winner;
In my testing of this idea, I found it useless for any system I would
consider trading.
The problem is, you take all the losses that pull the equity curve
down below your threshhold. But then you stop trading, and you DON'T
take the wins that dig you OUT of the drawdown! The net was negative
for most systems I looked at.
This approach might be beneficial for systems that are prone to long,
extended, horrific drawdowns, especially if they tend to be followed
by long positive runs. E.g. a simple-minded "buy the dips" system
goes in the toilet when the market turns down, and the equity-curve
approach might salvage it by taking it out of the market until the
market turns up again (though there are probably better and easier
ways to do it). But I wouldn't trade a system like that in the first
place.
Gary
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