Hi,
I am contemplating since a while on how to reduce drawdown while maintaining the return on account. Maybe you guys got some good ideas besides what I already know.
Assumption: We have a winning system that has a clearly definable edge and produces a rising equity curve over a couple of thousand trades.
Solutions for drawdown reduction:
1. Diversification across uncorrelated instruments
2. Combine the winning system with an inversely correlated or uncorrelated winning system
3. Combine your standard parameters of your winning system with different parameters of the same winning system, that will reduce drawdown overall. (Cause one parameter catches the move while the other doesn't)
4. Diversification of time-frames (although this is the weakest solution)
Any other qualified ideas from you guys?
I am contemplating since a while on how to reduce drawdown while maintaining the return on account. Maybe you guys got some good ideas besides what I already know.
Assumption: We have a winning system that has a clearly definable edge and produces a rising equity curve over a couple of thousand trades.
Solutions for drawdown reduction:
1. Diversification across uncorrelated instruments
2. Combine the winning system with an inversely correlated or uncorrelated winning system
3. Combine your standard parameters of your winning system with different parameters of the same winning system, that will reduce drawdown overall. (Cause one parameter catches the move while the other doesn't)
4. Diversification of time-frames (although this is the weakest solution)
Any other qualified ideas from you guys?