I am already wondering whether I made a mistake in designing the system

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June 7, 2017 at 4:01 pm #101656

LEONARDZIR
Participant

Nick,
I am really glad you started this topic. I find the hardest part of trading is staying in the game when your system is flat or in drawdown. Last month I only had a 3 1/2% drawdown in my MOC system which has been flat this month and I am already wondering whether I made a mistake in designing the system, or whether it was broken. I started to look at tweaks in the system. All of this because prior to mentoring I’d always lose money trading.
Most of the mental hurdles to staying with a system I suspect are tied up with what money and its loss mean to your psyche.
Len

June 7, 2017 at 4:01 pm #107078

LEONARDZIR
Participant

Nick,
I am really glad you started this topic. I find the hardest part of trading is staying in the game when your system is flat or in drawdown. Last month I only had a 3 1/2% drawdown in my MOC system which has been flat this month and I am already wondering whether I made a mistake in designing the system, or whether it was broken. I started to look at tweaks in the system. All of this because prior to mentoring I’d always lose money trading.
Most of the mental hurdles to staying with a system I suspect are tied up with what money and its loss mean to your psyche.
Len

June 7, 2017 at 10:43 pm #107083

Nick Radge
Keymaster

Quote:

Most of the mental hurdles to staying with a system I suspect are tied up with what money and its loss mean to your psyche.

The reason why you struggle staying with a system or method is because you had no confidence in what it can and cannot do.

You were scared because you were unsure how much money it could actually lose.

I see this a lot – people understand that losses are a part of trading. They accept that. Yet as soon as they start seeing some losses they stop.

The great unknown is not the binary question of losses, instead it’s the ‘how much?’

Now that you have done the testing, the stress testing and better understood the why’s and why not’s of the system, you should be better placed to trust the system and better accept the results one way or other.

June 27, 2017 at 5:26 am #107084

ScottMcNab
Participant

Len Zir wrote:

Nick,
I am really glad you started this topic. I find the hardest part of trading is staying in the game when your system is flat or in drawdown. Last month I only had a 3 1/2% drawdown in my MOC system which has been flat this month and I am already wondering whether I made a mistake in designing the system, or whether it was broken. I started to look at tweaks in the system. All of this because prior to mentoring I’d always lose money trading.
Most of the mental hurdles to staying with a system I suspect are tied up with what money and its loss mean to your psyche.
Len

I have found myself thinking about this in regard to future systems Len….how would I go with a brand new system that went into drawdown straight away and then had its worst year in the 20 year backtest ?…there is no reason a perfectly good system may not do this purely by chance..(1/20 or 5% possibility)..I suspect I would struggle

June 27, 2017 at 9:54 am #107149

TrentRothall
Participant

Scott McNab wrote:

Len Zir wrote:

Nick,
I am really glad you started this topic. I find the hardest part of trading is staying in the game when your system is flat or in drawdown. Last month I only had a 3 1/2% drawdown in my MOC system which has been flat this month and I am already wondering whether I made a mistake in designing the system, or whether it was broken. I started to look at tweaks in the system. All of this because prior to mentoring I’d always lose money trading.
Most of the mental hurdles to staying with a system I suspect are tied up with what money and its loss mean to your psyche.
Len

I have found myself thinking about this in regard to future systems Len….how would I go with a brand new system that went into drawdown straight away and then had its worst year in the 20 year backtest ?…there is no reason a perfectly good system may not do this purely by chance..(1/20 or 5% possibility)..I suspect I would struggle

I’m sort of dealing with this currently, my current DD isn’t the deepest but is the longest in duration of my testing (2000-now) coming up to 12 months.. Is it broken?? I’m not sure, but i’ll hang around to find out. My other system has been fluctuating between 0-3% DD basically all year also.

June 27, 2017 at 11:53 am #107150

LeeDanello
Participant

What is the max wait time in your testing for making equity highs? That might give you a clue.

June 27, 2017 at 12:24 pm #107085

JulianCohen
Participant

I have built two MOC systems and both of them went into drawdown for a month after I started to trade them. Then they came good. My US Swing system did the same, straight away into drawdown and now it is fine.

My XAO momentum system also went into drawdown straight away and stayed there for six months. I stopped trading it. Mistake? I don’t know. I swapped it for a WTT system which is also in drawdown ha ha.

June 27, 2017 at 6:28 pm #107153

Nick Radge
Keymaster

Quote:

I’m sort of dealing with this currently, my current DD isn’t the deepest but is the longest in duration of my testing (2000-now) coming up to 12 months.. Is it broken?? I’m not sure, but i’ll hang around to find out. My other system has been fluctuating between 0-3% DD basically all year also

Have you re-calibrated it for more recent (say 3-years) of data?

June 27, 2017 at 8:02 pm #107086

ScottMcNab
Participant

If the statistics I have heard are correct (regarding the % of time systems are below equity high) then we should perhaps expect this to happen we we launch a new system ?…divergence of reality and expectations can cause dissatisfaction when the problems may lies with the expectations themselves?

What has me thinking hard about this is the rotational systems I am designing at the moment…they appear very robust and have solid metrics but the only hiccup I have found is the long wait time between equity peaks…how would I go waiting a year to more for a positive return? (which is possible depending on market conditions)…I want to say I would be fine with it but in reality I have my doubts…might start with a smaller allocation and ease my way in to it..prob not the best from a returns perspective but it may at least allow me to trade the system and stick with it while my confidence grows in it

It sure is easier to be calm in a drawdown when the system is in profit

June 27, 2017 at 9:55 pm #107154

Nick Radge
Keymaster

Quote:

the only hiccup I have found is the long wait time between equity peaks

Welcome to trend following.

As easy as Michael Covel shouts the benefits of TF the reality is that its much more difficult to execute over the longer term, especially for most retail clients.

We have experienced this for years with the Growth Portfolio.

Whilst some people have pathetically stupid expectations (should be profitable in any 3-month period), even those that do offer some resilience still struggle at times.

This is the KEY reason why I state that you need multiple systems. Rather than be solely reliant on the ups and downs of a single system, you blend them and in doing so you also blend the ups and downs.

The ‘secret sauce’ is to not watch each system too closely, especially with more robust systems like trend systems.

Just let them do their thing…and take up fishing to keep your mind off.

June 28, 2017 at 7:22 am #107151

SaidBitar
Member

Trent Rothall wrote:

Scott McNab wrote:

Len Zir wrote:

Nick,
I am really glad you started this topic. I find the hardest part of trading is staying in the game when your system is flat or in drawdown. Last month I only had a 3 1/2% drawdown in my MOC system which has been flat this month and I am already wondering whether I made a mistake in designing the system, or whether it was broken. I started to look at tweaks in the system. All of this because prior to mentoring I’d always lose money trading.
Most of the mental hurdles to staying with a system I suspect are tied up with what money and its loss mean to your psyche.
Len

I have found myself thinking about this in regard to future systems Len….how would I go with a brand new system that went into drawdown straight away and then had its worst year in the 20 year backtest ?…there is no reason a perfectly good system may not do this purely by chance..(1/20 or 5% possibility)..I suspect I would struggle

I’m sort of dealing with this currently, my current DD isn’t the deepest but is the longest in duration of my testing (2000-now) coming up to 12 months.. Is it broken?? I’m not sure, but i’ll hang around to find out. My other system has been fluctuating between 0-3% DD basically all year also.

I will add myself to this group MY ASX MRV i started trading it and down it went and it is still in DD the good thing it is not going deeper i see it is trying to come out but it has a bit long way to travel around 20%+

Honestly i do nothing for it i know it will be OK just i have to wait for the correct market conditions for it, till then i will continue to place the trades.

June 28, 2017 at 7:37 am #107152

ScottMcNab
Participant

Is the 50% increase from Mar-Jul higher than average for most 4-5 months periods in backtesting Trent ? I have seen in back tests that in cases of extreme, rapid gains (high ROC) that this is often followed by a more severe (%) drawdown or a longer time in drawdown simply because the equity high itself was an extreme….ie the equity curve reverts to the mean…

June 28, 2017 at 8:35 am #107162

TrentRothall
Participant

Yes it was higher than expected, certainly doesn’t have a 100% CAGR (i wish). Yes i see what your saying too Scott.

Have been optimising some recent data, i thought i had – but i hadn’t. A few things to implement i think!

June 29, 2017 at 8:23 am #107163

TrentRothall
Participant

Made some tweaks after looking at some recent data as Nick suggested. I realised i had only looked at my other system and not this one… See how it works out over the next 6 months
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