Stocks & Commodities V. 31:7 (10–17): Trading The Equity Curve by Oscar Cagigas
Product Description
Trading The Equity Curve by Oscar Cagigas
Getting Lean And Mean
Trading The Equity Curve
A trading system that brings in consistent profits is a keeper. But if it stops giving you the results you want, is it best to stop using it? We take a look.
When a trading system’s equity falls below its moving average, most traders will deactivate their system to limit its damage, or remove any component of a portfolio that is not performing as well as the others. But there is another way to reduce risk, drawdown, and the possibility of portfolio ruin.
Creating a simulated environment
In this article, I will demonstrate several tests you can perform to trade the equity curve of your system. I ran several tests using a simple trend-following trading system of my own that is Donchian-based. The system itself is not relevant for this article, since you can use any trading system. The portfolio I chose to trade is a mix of randomly selected commodities as follows (eSignal tickers are in parenthesis):
Australian dollar (AUD A0-FX)
Eurodollar (EUR A0-FX)
Gold (GC #F)
Lean hogs (HE #F)
Copper (HG #F)
Heating oil (HO #F)
Coffee (KC #F)
Palladium (PA #F)
Platinum (PT #F)
Brent crude (QM #F)
Sugar (SB #F)
Silver (SI#F)
Swiss franc (USDCHF A0-FX)
Treasury bonds (ZB #F)
Corn (ZC #F)
Soybeans (ZS #F)
10-year Treasury notes (ZN #F)
Dow (DJ #F)
When traded individually, some of these commodities generate losses in the system. When one or several of these markets starts losing traction or desynchronizing with the system’s logic, I try to identify techniques that can be applied to reduce the system’s risk.
Getting Lean And Mean
Trading The Equity Curve
A trading system that brings in consistent profits is a keeper. But if it stops giving you the results you want, is it best to stop using it? We take a look.
When a trading system’s equity falls below its moving average, most traders will deactivate their system to limit its damage, or remove any component of a portfolio that is not performing as well as the others. But there is another way to reduce risk, drawdown, and the possibility of portfolio ruin.
Creating a simulated environment
In this article, I will demonstrate several tests you can perform to trade the equity curve of your system. I ran several tests using a simple trend-following trading system of my own that is Donchian-based. The system itself is not relevant for this article, since you can use any trading system. The portfolio I chose to trade is a mix of randomly selected commodities as follows (eSignal tickers are in parenthesis):
Australian dollar (AUD A0-FX)
Eurodollar (EUR A0-FX)
Gold (GC #F)
Lean hogs (HE #F)
Copper (HG #F)
Heating oil (HO #F)
Coffee (KC #F)
Palladium (PA #F)
Platinum (PT #F)
Brent crude (QM #F)
Sugar (SB #F)
Silver (SI#F)
Swiss franc (USDCHF A0-FX)
Treasury bonds (ZB #F)
Corn (ZC #F)
Soybeans (ZS #F)
10-year Treasury notes (ZN #F)
Dow (DJ #F)
When traded individually, some of these commodities generate losses in the system. When one or several of these markets starts losing traction or desynchronizing with the system’s logic, I try to identify techniques that can be applied to reduce the system’s risk.
FOR THOSE ORDERING ARTICLES SEPARATELY:
*Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at store.traders.com users can view the S&C Digital Edition in the subscriber's section on Traders.com.
| Take Control of Your Trading. |
| Professional Traders' Starter Kit |
| All these items shown below only $299.99! |
| Click Here to Order |