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A random entry/exit system that I coded up in Amibroker, after 2500 runs using 10 years of data from 1/1/97 until 31/12/06, showed a 95% chance of a CAGR > 7.7% and a 95% chance of experiencing a Max DD no worse than 33.3%.  No single run had a negative CAGR or a Max DD greater than 55%.    This system used nothing more sophisticated than 10x10% position sizing and a 10% stoploss.  There was no leverage.


As mentioned, entry and exit were random, holding period was between 1 and 6 months, market exposure was 76%, average trades per run was 449...brokerage was included at $33 each way.  Average CAGR and Max DD was 12.2% and 27.4% respectively.  Dividends were not included, you might conservatively estimate an extra 2.5% CAGR if you include dividends. 


By adding a simple momentum filter (and I mean SIMPLE), these results were improved to become 14.7% CAGR (still without dividends) and 25.6% Max DD.  Market exposure was reduced to 61%.  No single run produced a CAGR of less than 2.5% or a Max DD greater than 50%.


My belief is that if you can't design a system that beats this system using the same data then you don't have a system with a sufficient edge to beat the market.


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