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Which System Do You Prefer?

  • Poll

  • Which System Do You Prefer?
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  • Post #1
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  • First Post: Jan 1, 2007 12:00pm Jan 1, 2007 12:00pm
Suppose you have the chance to select between the following systems. Which one do you select.

 

  1. System 1: Higher relative drawdowns (up to 35% of account balance), Higher return (150% growth in 1 year)
  2. System 2: Lower relative drawdowns (up to 20% of account balance). Lower return (100% growth in 1 year)

Suppose that you have no other options other than these two.

System 1
Same Whore .... Different Dress
I voted for system 2 but i think there might be a contradiction here. A system with lower DD does not necesarily provide lower returns. what I mean is that it depends what you base your position sizing on. In order to get the most profitability out of any system your position sizing should be based on your DD. In another words the higher the DD of a system the smaller the % of the account that should be risked on any given trade. So since you risk less you make less. With such an aproach a system with a high DD might have smaller returns and a system with lower DD higher returns symply because you can risk more of your account and still keep the risk of blowing your account under control. Hope you see what i mean.
Stubbornly persistent
Quoting sergiu
I voted for system 2 but i think there might be a contradiction here. A system with lower DD does not necesarily provide lower returns. what I mean is that it depends what you base your position sizing on. In order to get the most profitability out of any system your position sizing should be based on your DD. In another words the higher the DD of a system the smaller the % of the account that should be risked on any given trade. So since you risk less you make less. With such an aproach a system with a high DD might have smaller returns and a system with lower DD higher returns symply because you can risk more of your account and still keep the risk of blowing your account under control. Hope you see what i mean.
right on! 5 pips a day is all i need...is that so hard?
Quoting jest1081
right on! 5 pips a day is all i need...is that so hard?
With practice and discipline... anyone can do this with any method that they have...

Mantra from Douglas E Zalesky - MAKE THE SAME TYPE OF TRADES OVER AND OVER AGAIN – BE A BRICKLAYER: A bricklayer shows up for work every day of his working life and executes with the same methodology - brick by brick by brick.
Thanks for your feedback. It seems that there are many people who prefer to be aggressive.
Lower relative drawdowns, higher return - you have forgot this point

I gess drawdawn for beginers. I have my limit of damages.
Prof Herman
It's very hard. Be sure!
Quoting jest1081
right on! 5 pips a day is all i need...is that so hard?
Hi,
Quoting aparsai
Suppose you have the chance to select between the following systems. Which one do you select.





 

  1. System 1: Higher relative drawdowns (up to 35% of account balance), Higher return (150% growth in 1 year)
  2. System 2: Lower relative drawdowns (up to 20% of account balance). Lower return (100% growth in 1 year)

Suppose that you have no other options other than these two.

Going by simple assumptions, for each percentage drawdown of system 2, you get 5% growth. But for each percentage drawdown of system 1, you get 4.3% of growth. With the information above I would go with system 2, because you could in theory increase your risk in system 2 to get a drawdown of 35% and get 175% growth :

Best regards
Alan
Quoting firehorse
Hi,Going by simple assumptions, for each percentage drawdown of system 2, you get 5% growth. But for each percentage drawdown of system 1, you get 4.3% of growth. With the information above I would go with system 2, because you could in theory increase your risk in system 2 to get a drawdown of 35% and get 175% growth :

Best regards
Alan
thanks firehorse for your wise comment
Hey Linuxtroll. I don't know how you only have one green dot. You're right on brother. Your philosophy definitely coinsides with mine.
How you act is more important than how you feel.
i prefer smaller drawdown ... stay in the game longer.
I'm not sure I like this question, but if I had to choose between the 2, I would choose #2... It's possible though to risk very little and make up way more than you risk
Definitely the lower drawdowns one for me. FX is dangerous as hell, you gotta minimize the risk of damage imo.
How you act is more important than how you feel.
Just for consideration folks...


A 100 Pip Drawdown is entirly acceptable if your Target is 1000 Pips.
So... Explain to me again please, What is a BIG Drawdown?
I chose low drawdown with low "returns." I know with low drawdowns that I'm "safe" putting in more than 1-2% of my account and that compounding will make me ridiculously rich. Who cares about how well I perform over 1-2 months or even 1-2 years? I care about where I'm at 2-10 years from now.
Quoting permanentjaun
I chose low drawdown with low "returns." I know with low drawdowns that I'm "safe" putting in more than 1-2% of my account and that compounding will make me ridiculously rich. Who cares about how well I perform over 1-2 months or even 1-2 years? I care about where I'm at 2-10 years from now.
Thanks for your response. It sounds like a reasonable approach.
Why are we in this business? Its because we want to make a higher return on our money, compared to other investment products. This is coupled with a higher risk, aka a higher drawdown.
Now that we have mentally prepared for this higher drawdown, still a high % of people wants to lower the drawdown in cost of the ROI? I dont quite understand it.
No matter how big the drawdowns, you should always aim for the highest ROI possible. Especially in the Forex market.
I mean, nobody on this forum actually needs his forex account $s to be able to live right?
No FrankS. We're not in here to make a higher return on our money. We're here to simply make money any way we can. You'll have to hit a hot streak of trades to be able to handle a system that has massive drawdowns. Even then, consider comparing a safer system to one that is volitile. With the volitile system you may have to trade with smaller lots if you enter a bad streak of trades. The safer system will rarely go backwards. It'll just keep compounding and compounding. As mentioned I'd also feel more comfortable putting 3-4% in a safe consistent system. So it compounds quicker. In the end my safer system could easily outperform your volitile system.

Yea, you could probably take an early lead for a week or a couple months. As I mentioned in my previous post, are you more concerned about where you'll be in 5 months or 5 years?
Quoting jest1081
right on! 5 pips a day is all i need...is that so hard?
I assume that you over-leverage your account when u say that u only need 5 pips a day, and that's the synonymous of adding unnecessary risk that is not related to the markets, but rather to the nature of your capital, if you want to leverage ur account u must be sure of what would happen in the future, and by sure i mean u are the one who moves the market, and i believe that u don't do so.
My advice for all the beginners that only need 5 pips a day, is to forget this idea unless your account is not leveraged (i.e 1:10)
just my thoughts.
thank you
Trading is a long and a short story.
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