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Which System Do You Prefer?

  • #21
  • Jan 8, 2007 10:30pm Jan 8, 2007 10:30pm
okay i had to break out the sheet, sorry !! start with one and go 25 long and ever so boring years, full of joy, laughter, and $$$? ...

left column system (1) 1*2.5*.65
right column system (2) 1*2*.8

1.6251.6
2.6406252.56
4.2910156254.096
6.9729003916.5536
11.3309631310.48576
18.4128150916.777216
29.9208245326.8435456
48.6213398642.94967296
79.0096772768.71947674
128.3907256109.9511628
208.634929175.9218604
339.0317597281.4749767
550.9266095450.3599627
895.2557404720.5759404
1454.7905781152.921505
2364.034691844.674407
3841.5563712951.479052
6242.5291024722.366483
10144.109797555.786373
16484.1784112089.2582
26786.7899219342.81311
43528.5336130948.50098
70733.8671249517.60157
114942.534179228.16251
186781.6179126765.06

i think i did that right, ha... bit tired. this was calculated using a year end, single maximum allowed drawdown as a frequency of drawdown wasnt indicated....
  • #22
  • Jan 10, 2007 1:33pm Jan 10, 2007 1:33pm
if both the drawdown and the profit margin are guaranteed to cotinue forever then it would have to be system one.

I would choose this system if it had a drawdown to 80/90% of my account if I was guaranteed to make 150% in the year overall and had no risk of losing my whole account at any point.

confused
quote of the day: . It's like deja-vu all over again
  • #23
  • Jan 10, 2007 3:46pm Jan 10, 2007 3:46pm
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.

I chose system 2.

In my own methodology which seems to work pretty well I do a lot of trades in which each one does not use a very large portion of my equity. I seldom use stop/loss because for each position I make it so that it could theoretically move -1000 pips against me before the dent it would make in my account would begin to hurt. However, I rarely get a trade go that bad (plus I do something about it before then! ). While each position does not make a huge % of gain in my account when I take profit, I average between 40-90 pips a day out of multiple trades which leads to a weekly % gain of around 2-5% of my account and a monthly gain of over 10% (specifically since Dec. 1, 2006, I'm up almost 25% on my account). The other thing I do is trade primarily in directions which will make interest if I have to hold the position for a few days (for example always long on JPY pairs, never short).

Simply put I'm making a lot of smaller trades where the goal is to make profits of 15-30 pips per trade. Over time, nearly every one of them eventually come back to make money. Those that go into losing positions for lengthy periods of time, they're usually making me interest. As the interest grows, I take that and sell off bits of my positions at a time and phase myself out of the huge losing positions without damaging my account. Consequently, my account is nearly always growing with occasional VERY small reductions.

This strategy has been working live for me now for several months and I couldn't be happier about it. I used to do larger lots but I couldn't afford to hold on to the natural swings in the currencies. So, I tried the age old philosophy of diversification with smaller amounts of equity. I may have anywhere between 10-20 open positions going at one time. Sometimes multiples of the same pair. So, the odds catch up and usually everyday I'm able to cash in on several of them at a time, and consequently the consisent profits.

So yes, I do use a smaller equity for slower gains and I'm happy about it!

GirlFlyer
  • #24
  • Jan 10, 2007 5:26pm Jan 10, 2007 5:26pm
Quoting GirlFlyer
I chose system 2.

In my own methodology which seems to work pretty well I do a lot of trades in which each one does not use a very large portion of my equity. I seldom use stop/loss because for each position I make it so that it could theoretically move -1000 pips against me before the dent it would make in my account would begin to hurt. However, I rarely get a trade go that bad (plus I do something about it before then! ). While each position does not make a huge % of gain in my account when I take profit, I average between 40-90 pips a day out of multiple trades which leads to a weekly % gain of around 2-5% of my account and a monthly gain of over 10% (specifically since Dec. 1, 2006, I'm up almost 25% on my account). The other thing I do is trade primarily in directions which will make interest if I have to hold the position for a few days (for example always long on JPY pairs, never short).

Simply put I'm making a lot of smaller trades where the goal is to make profits of 15-30 pips per trade. Over time, nearly every one of them eventually come back to make money. Those that go into losing positions for lengthy periods of time, they're usually making me interest. As the interest grows, I take that and sell off bits of my positions at a time and phase myself out of the huge losing positions without damaging my account. Consequently, my account is nearly always growing with occasional VERY small reductions.

This strategy has been working live for me now for several months and I couldn't be happier about it. I used to do larger lots but I couldn't afford to hold on to the natural swings in the currencies. So, I tried the age old philosophy of diversification with smaller amounts of equity. I may have anywhere between 10-20 open positions going at one time. Sometimes multiples of the same pair. So, the odds catch up and usually everyday I'm able to cash in on several of them at a time, and consequently the consisent profits.

So yes, I do use a smaller equity for slower gains and I'm happy about it!

GirlFlyer
Impressive results. Good for you GirlFlyer. It looks you've find your way to success.
  • #25
  • Edited Feb 1, 2007 1:07pm Jan 12, 2007 7:10am | Edited Feb 1, 2007 1:07pm
system 1.
and if you have a system with drawdown smaller, i would like to see.

Kind regards,

Marcelo Marques

_______________________________________
  • #26
  • Mar 29, 2007 9:23am Mar 29, 2007 9:23am
I'm not sure if using 5% equity per trade is considered as big drawdown. So I can't really vote lol.
  • #27
  • Mar 29, 2007 10:03am Mar 29, 2007 10:03am
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.

I'm guessing what you're trying to determine is whether or not people are prepared to risk more to make more. Just look at how many "unlucky" people enter the lottlo - big payoff, almost certain loss.

In your example the risk:return caluclation is simple. In System #1 the risk:return ratio is 1:4.2 (max drawdown:net return) and in System #2 the ratio is 1:5. Clearly #2 is a better choice.

If you merely leveraged up by 50% in system #2 your return would rise to 150% but your drawdown would only be 30% vs. 35%.

If both systems had the same r:r figures it would simply be a matter of personal choice as to how high you would like to leverage up. Too much leverage and you could wind up with a 100% drawdown and you'd be out of the game. Too low and you'd take forever to get anywhere.

Just as an aside a r:r ratio of above 4 is excellent. Both your systems seem to be above 4. But I'd guess this is more of a hypothetical situation.
  • #28
  • Mar 30, 2007 6:53am Mar 30, 2007 6:53am
Quoting faure
I'm guessing what you're trying to determine is whether or not people are prepared to risk more to make more. Just look at how many "unlucky" people enter the lottlo - big payoff, almost certain loss.

In your example the risk:return caluclation is simple. In System #1 the risk:return ratio is 1:4.2 (max drawdown:net return) and in System #2 the ratio is 1:5. Clearly #2 is a better choice.

If you merely leveraged up by 50% in system #2 your return would rise to 150% but your drawdown would only be 30% vs. 35%.

If both systems had the same r:r figures it would simply be a matter of personal choice as to how high you would like to leverage up. Too much leverage and you could wind up with a 100% drawdown and you'd be out of the game. Too low and you'd take forever to get anywhere.

Just as an aside a r:r ratio of above 4 is excellent. Both your systems seem to be above 4. But I'd guess this is more of a hypothetical situation.
Hi faure,

Thanks very much for your feedback.


Al
  • #29
  • May 15, 2007 3:10am May 15, 2007 3:10am
surfival for dailly digest, put extra profit at higher risk
  • #30
  • May 15, 2007 3:40am May 15, 2007 3:40am
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

Yeah man. I'm with him.
  • #31
  • Last Post: May 15, 2007 4:47am May 15, 2007 4:47am
Quoting Bemac
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 thought "drawdown" was always relative to your account. So is not about pips, strategy is about pips.

A drawdown of 35% on a 10.000 account means you lose 3500.

A system is also always a combination of 'strategy' + 'money management', no?
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