Normal
An initial stop loss increases trade frequency (and decreases win %). It thus increases trade costs. All the studies of initial stop loss that I've seen (including yours - systems 2 and 3) fail to take trade costs into account - if they do include trade costs, all of a sudden the initial stop doesn't seem quite so attractive, as the drawdown and CAGR then end up much the same as a system that doesn't use an initial stop. Having said that, further investigation of an initial stop loss is the one entry-related item on my to do list as the work I did a while back suggested there might be something a bit worthwhile there.In regards to universes - you get much the same comparative results when using a delisted universe as you do when you use the current ASX200. It was just a convenient folder I had lying around.It is my view that a long term trend following system should always be fully invested in the market. This is consistent with my views that the entry has no positive predictive value and that the edge in these systems is the upwards bias in the market, which is omnipresent in the time frame we are trading in. This is also consistent with the observations that I have never been able to develop and have never seen an index filter which improves results, with all filters hurting results.Anyhow, if you want to muck about with a few % difference in outcome, then keep working on the entry. If you want to change your results by orders of magnitude, then work on money management.
An initial stop loss increases trade frequency (and decreases win %). It thus increases trade costs. All the studies of initial stop loss that I've seen (including yours - systems 2 and 3) fail to take trade costs into account - if they do include trade costs, all of a sudden the initial stop doesn't seem quite so attractive, as the drawdown and CAGR then end up much the same as a system that doesn't use an initial stop. Having said that, further investigation of an initial stop loss is the one entry-related item on my to do list as the work I did a while back suggested there might be something a bit worthwhile there.
In regards to universes - you get much the same comparative results when using a delisted universe as you do when you use the current ASX200. It was just a convenient folder I had lying around.
It is my view that a long term trend following system should always be fully invested in the market. This is consistent with my views that the entry has no positive predictive value and that the edge in these systems is the upwards bias in the market, which is omnipresent in the time frame we are trading in. This is also consistent with the observations that I have never been able to develop and have never seen an index filter which improves results, with all filters hurting results.
Anyhow, if you want to muck about with a few % difference in outcome, then keep working on the entry. If you want to change your results by orders of magnitude, then work on money management.
Hello and welcome to Aussie Stock Forums!
To gain full access you must register. Registration is free and takes only a few seconds to complete.
Already a member? Log in here.
