So I've spent the last few months coding away at an idea I've had for a while (nothing new though) - using a mechanical system to channel trade. I think I've finally coded something up that works and tested thoroughly through Amibroker.
As a part of my testing, I was playing around with the trailing stop I set in the system - I originally had it set at 15% and it gave me the following results over a 5 year period:
While playing around with the stop loss, I started making it wider and wider just to see how the results would change and was a bit dumbfounded with the results. This is what a 30% stop looked like:
I have tested this over different sampling periods as well and the results still show the same thing. The wider the stop, the higher the % annual return. However, drawback is that the drawdown also increases with wider stops.
Has anyone else seen the same sort of phenomena here? This is the first time I've seen a system that increases in profitability by having wider stops...