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Listening to that Adrian Reid podcast really got me thinking about DDs differently this week.

https://www.traderwave.com/blog/trading-conversations/adrian-reid/

He strongly argues that traders (especially new and learning ones!) should foremost figure out the maximum loss they can tolerate as part of the essential "personality fitting" of their chosen trading system.

Skate gave an excellent example recently by showing the returns for his "Skate modified CAM strategy" versus "Skate modified CAM with stale stop".

Over a 3 year period (18/2/17 - 18/2/20):
[ATTACH=full]100663[/ATTACH]

Nick Radge is fond of saying new traders should estimate the maximum DD they think they can tolerate, then divide by 2 (or some factor - can't remember exactly). Frankly 15.75% DD is a pretty amazing figure for most systems. The key point is as tempting as the first column is, you have to start honestly with the 2nd column to help you choose which system to run.

So with pyramdiing, if you do it very well, you may end up with even better than 37.5% max return, but you would want to be VERY careful looking at the Max DD - it may have increased well above the example -15.75% in the table above.....

<blockquote data-quote="Newt" data-source="post: 1057729" data-attributes="member: 50018">Listening to that Adrian Reid podcast really got me thinking about DDs differently this week.&nbsp; <a href="https://www.traderwave.com/blog/trading-conversations/adrian-reid/" target="_blank">https://www.traderwave.com/blog/trading-conversations/adrian-reid/</a>He strongly argues that traders (especially new and learning ones!) should foremost figure out the maximum loss they can tolerate as part of the essential &quot;personality fitting&quot; of their chosen trading system.&nbsp; Skate gave an excellent example recently by showing the returns for his &quot;Skate modified CAM strategy&quot; versus &quot;Skate modified CAM with stale stop&quot;.Over a 3 year period (18/2/17 - 18/2/20):[ATTACH=full]100663[/ATTACH]Nick Radge is fond of saying new traders should estimate the maximum DD they think they can tolerate, then divide by 2 (or some factor - can&#039;t remember exactly).&nbsp; Frankly 15.75% DD is a pretty amazing figure for most systems.&nbsp; The key point is as tempting as the first column is, you have to start honestly with the 2nd column to help you choose which system to run.So with pyramdiing, if you do it very well, you may end up with even better than 37.5% max return, but you would want to be VERY careful looking at the Max DD - it may have increased well above the example -15.75% in the table above.....</blockquote>

[QUOTE="Newt, post: 1057729, member: 50018"] Listening to that Adrian Reid podcast really got me thinking about DDs differently this week. [URL]https://www.traderwave.com/blog/trading-conversations/adrian-reid/[/URL] He strongly argues that traders (especially new and learning ones!) should foremost figure out the maximum loss they can tolerate as part of the essential "personality fitting" of their chosen trading system. Skate gave an excellent example recently by showing the returns for his "Skate modified CAM strategy" versus "Skate modified CAM with stale stop". [B]Over a 3 year period (18/2/17 - 18/2/20):[/B] [ATTACH=full]100663[/ATTACH] Nick Radge is fond of saying new traders should estimate the maximum DD they think they can tolerate, then divide by 2 (or some factor - can't remember exactly). Frankly 15.75% DD is a pretty amazing figure for most systems. The key point is as tempting as the first column is, you have to start honestly with the 2nd column to help you choose which system to run. So with pyramdiing, if you do it very well, you may end up with even better than 37.5% max return, but you would want to be VERY careful looking at the Max DD - it may have increased well above the example -15.75% in the table above..... [/QUOTE]

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