Trading During Moments of Drawdowns
It is called strategy. And it is, but aggressive because it goes against the trend..... It consists of closing at the system's historical high and buying whe..
ALGORITHMIC TRADING
Javier González-Barros, CFTe
4/10/20242 min read
Where should one activate in a trading system?
It is called strategy. And it is, but aggressive because it goes against the trend..... It consists of closing at the system's historical high and buying when it approaches the drawdown. The question is how profitable it would have been in a system that has been winning for a long time like this one
Looking at the drawdown
Looking at the drawdown chart, let's see if it makes any sense.
-10.000
-15.000
Wow, seen this way, it's hard to find the system for trading with a trading system...
The solution that I see off the top of my head...
The most profitable will possibly be drawdowns of 3000 in loss and exiting at highs. It does this about 35 times x 3000 = 105,000.
In drawdowns of -10,000 and waiting for it to make a new high, there are only 4, meaning you would have earned 40,000.
In drawdowns of -15,000 and waiting for it to make a new high, there are only 5, meaning you would have earned 60,000.
But what is definitely more profitable is being +222,000 and enduring that drawdown because if you don’t wait for the maximum loss that you had set as a stop loss for that system, you don’t keep your word, and therefore the numbers are useless because they are what helps us to make the best decisions. What was studied beforehand was one thing. Stick to it, and if it goes well, stay. But don’t fall into the loop of the mistake of entering at a high, it falls, and I exit, and then it reaches another new high, and I enter again, and then it goes into a drawdown, etc... that's a guaranteed loss
Setting a maximum drawdown is the best thing you can do if you only operate one system. If you operate more systems at the same time, the stop loss will be for the entire portfolio