I suggest everyone retest their strategies back to 1997, specifically 27th October 1997 – the start of the Asian currency crisis. While the bounce was just as spectacular, you should see a similar depth of drawdown to what is being seen today

My MR MOC daily returns are similar to Julian’s, although I started in Apr so missed the first 3 months of the year.

To me it seems the up days since April haven’t had a dip intraday to satisfy the stretch so I’ve sat on the side lines.

The drawdown on 27 Oct 97 was -9.1% followed by a 16.9% gain next day.

Current DD is still ahead of B&H…….happy to carry on.

My MOC is made up of 3 setups. Yesterday I stripped each out separately and looked at the drawdowns of each and also combined. The chart below is a little hard to decipher, but Series 1, 2 and 3 are the individual setups and Series 4 is the combined. What is obvious is that setup #2 tends to have larger drawdowns and slower recovery rates. It has the highest CAGR of the 3, but also the worst drawdown and the lowest MAR.

I might spend today optimising the position sizing.

Another interesting fact that may appeal to others, is the combination of all setups have a higher MAR than each individually.
Setup #1 = 1.60
Setup #2 = 1.51
Setup #3 = 1.65
Combined = 2.76

I have been doing some research on why my MRV took such a hit. I went back through my notes and noticed that I initially tested this with 20 stocks on the S&P but then changed it later to only use 10 stocks because I got a higher CAGR with some added drawdown. I went back and tested the system very far back (the one with 10 stocks) and the drawdowns were much worse than I thought, I did not test that far back when I initially made the system. I actually re-tested the same MRV with 20 stocks over the last 3 years and it outperformed the one with 10 by 40% CAGR!! Additionally, the drawdown wasn’t nearly as steep in the last couple of months. I would have likely still been trading it.

When I initially built my systems they were not geared for a good MAR or even took drawdown into consideration as much. I was more focused on making a large CAGR and that worked out well for 2020 when the market was screaming and my systems performed 250% combined. Fast forward to 2022 and my systems took massive hits because drawdown just wasn’t my focus back then, I didn’t have much money in those accounts. Now that my accounts are quite large, I really have to focus on preserving capital. Luckily I turned them off before June hit which saved me a lot of pain. Now its time to focus on preservation rather than growth.

Good point Julian,

Luckily I am still in the game and will keep trading, I just have to re-think how things are done going forward. Especially in light of my mistake AND the fact that the market can really go haywire like it did in June. Unfortunately, testing has its limitations as you pointed out. I am finishing up school so I can really start to focus on what I want to do which is trading and writing software to support that goal.