Reply to thread

I have personally found 1.5% risk to be a good trade-off.

Just a question for everybody.

When your portfolio is experiencing a period of drawdown, how do you know whether its just another drawdown or whether the system no longer works because market dynamics/conditions have changed?

Howard mentioned on the Robustness thread that he thinks trend following (or at least that of the Donchian channel style) worked well in the 1970s and 1980s but does not work well now. He included John W. Henry as an example of a renowned trend follower who has struggled thus far in 2007.

Couldnt it just be John W. Henry's funds are just going through a period of drawdown? Surely 8 months isnt enough to say a system has failed?

Michael Covel in his book goes through some of Henry's performances. Its happened a few times through the history of his fund that he was in the red until October, then still finished the year nicely as some huge trends took off in the last 2 months of the year.

Trend following, well at least is my understanding, isnt supposed to be a slow and steady method. Of course this doesnt mean that adding extra conditions to your system wont smoothen out the equity curve.