An Idea for your consideration.
I read about this in the woodie cci forums. It involves graphing your equity curve and using a moving average to be determined by the individual trader.
The idea is that by graphing your equity curve, it gives you an undeniable indication of when you are losing money and therefore should ring an alarm bell for you to stop trading live or to at least lighten up significantly on position size.
Let us say that your historical tests show that you will regularly see a 10% drawdown with a small chance, say 5% chance of a 25% draw down.
You could graph your equity curve with moving averages, and if you experience a drawdown that penetrates those moving averages you switch to demo or paper trades until such time as profits from those demo/paper trades would bring your equity curve back above the moving average, you would then recommence live trading. The interim from going to losing to making money on your trades may include discovering complacency in your processes, you were fighting the market trend, the market conditions had changed substantially enough to invalidate your strategy, your phsycology had grown incompatible with profitable trading, etc. etc.
This guards against complacency. It guards against you being caught in an "up trend" mind set as the market goes flat or rolls over into a down trend. It keeps you focused on the one indicator that matters, your equity curve. So hopefully it guards against seeing 50% or worse drawdowns in your account equity, unless your trading style finds that type of volatility acceptable of course.
The moving average threshold has to be set by the individual according to their trading style/strategy and it's max drawdown probabilities plus taking into account that individuals appetite for volatility.
If the ideas piques your interest or you would like further explaination or discussion, I will try to dig up a link to the thread in the other forum.Ignored