Hello,
This is an interesting article on the analysis of capital curve. What do you think about this approach? Whether you are using a practice analysis of its curve of capital?
http://www.adaptrade.com/Articles/article-eq.htm
You can simultaneously play the same system in the real world and on the demo. If your account real curve goes below the moving average, continue to play in your demo. Conversely, if the demo equity curve crosses from below moving average then switch to the real account. Interesting approach.recently, I use this method and it looks promising.
Equity curve trading
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PebbleTrader
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Not all trading strategies work all the time. One way to decide which strategy to use is to paper trade them all and choose those that show the most promise, based on their equity curves.
Be honest. Do you believe enough in your current trading strategy that you?d stick to it come rain or come shine? Say you have four or five losers in a row -- will you continue to trade exactly the same way as before, or will you start bending your rules or perhaps even discard the particular approach completely?
The truth is that most traders abandon a strategy after three or four consecutive losing trades, thinking it no longer works. In reality, though, no approach will work well all the time. A trend-following strategy simply will not work in a choppy market, just as a top- and bottom-picking strategy is very unlikely to work in a trending market. It isn?t the strategy?s fault the market isn?t behaving in a way most suitable to its underlying logic.
The questions you need to ask yourself are, ?When should I stop trading -- or re-optimize -- a strategy that is obviously not in tune with current market conditions? And, ?How do I know when to start trading the same strategy again?? Alternatively, if you trade the same markets using several strategies, how do you know which strategies are currently the best to use?
Another side of the same dilemma occurs when you dig up that age-old strategy you once abandoned because it didn?t seem to be working, only to discover several years later that it would have worked like a charm had you just been patient enough and given it some time. But, there are tools that can help you determine when a trading approach is in sync with the market and when you?d be better off not trading it.
System Monitoring
A trader who lost more than $1 million trading pork belly futures was asked why he kept on trading the same strategy in the same market despite the obvious fact that it wasn?t working. His response: ?This is the only thing I know how to do.? The trader truly believed that he had just been a little unlucky lately and that the only way to come back was to continue trading pork bellies using the same strategy he always had -- until his luck turned around once again.
It never occurred to the pork belly trader that it doesn?t matter which markets he trades or what strategy he uses, as long as he makes money. He should have cut his losses by changing either the market he was trading, his strategy, or both, and not fall back on the original market-strategy combination until the elements showed some solid proof of being in sync with each other again.
To avoid making the same mistake as the pork belly trader, you need to use a filter technique that will monitor your strategy?s performance from the inside, so to speak, and tell you when to trade or not trade a particular model on a particular market.
The JoeKrut Diff (JKD) and JoeKrut Measure (JKM) indicators are tools that enable you to monitor (but not trade) a system during its drawdown periods so that you can begin to trade it as soon as it shows signs of starting to perform well again. Paired together with any type of trading strategy, these two indicators can increase overall performance and strengthen your bottom line.
The JKM indicator is a 30-day moving average of your strategy?s equity curve. The idea is to trade a strategy only when the continuously paper-traded JKM is rising. For easier and quicker interpretations, the JKD indicator measures the difference in the JKM indicator from one day to the next. When the JKD is negative, the JKM is declining and, consequently, the strategy should not be traded in real time.
A Basic Strategy
To illustrate how these tools work, we?ll show how a trading system called JK-Call Buyer performs with and without them. The strategy we?ll look at has been tested over the full history of the NYSE futures, S&P 500 futures and the E-Mini futures with no changes made to the rules or the logic. So far, it has been more than 75 percent correct in all three markets.
The strategy works on end-of-day data and gives all trade signals as market orders the night prior to execution. Here it?s illustrated with the S&P 500 futures, but it can be used on individual stocks, as well as at-the-money call options. The strategy exits all trades after 10 days, regardless of any other factors.
Be honest. Do you believe enough in your current trading strategy that you?d stick to it come rain or come shine? Say you have four or five losers in a row -- will you continue to trade exactly the same way as before, or will you start bending your rules or perhaps even discard the particular approach completely?
The truth is that most traders abandon a strategy after three or four consecutive losing trades, thinking it no longer works. In reality, though, no approach will work well all the time. A trend-following strategy simply will not work in a choppy market, just as a top- and bottom-picking strategy is very unlikely to work in a trending market. It isn?t the strategy?s fault the market isn?t behaving in a way most suitable to its underlying logic.
The questions you need to ask yourself are, ?When should I stop trading -- or re-optimize -- a strategy that is obviously not in tune with current market conditions? And, ?How do I know when to start trading the same strategy again?? Alternatively, if you trade the same markets using several strategies, how do you know which strategies are currently the best to use?
Another side of the same dilemma occurs when you dig up that age-old strategy you once abandoned because it didn?t seem to be working, only to discover several years later that it would have worked like a charm had you just been patient enough and given it some time. But, there are tools that can help you determine when a trading approach is in sync with the market and when you?d be better off not trading it.
System Monitoring
A trader who lost more than $1 million trading pork belly futures was asked why he kept on trading the same strategy in the same market despite the obvious fact that it wasn?t working. His response: ?This is the only thing I know how to do.? The trader truly believed that he had just been a little unlucky lately and that the only way to come back was to continue trading pork bellies using the same strategy he always had -- until his luck turned around once again.
It never occurred to the pork belly trader that it doesn?t matter which markets he trades or what strategy he uses, as long as he makes money. He should have cut his losses by changing either the market he was trading, his strategy, or both, and not fall back on the original market-strategy combination until the elements showed some solid proof of being in sync with each other again.
To avoid making the same mistake as the pork belly trader, you need to use a filter technique that will monitor your strategy?s performance from the inside, so to speak, and tell you when to trade or not trade a particular model on a particular market.
The JoeKrut Diff (JKD) and JoeKrut Measure (JKM) indicators are tools that enable you to monitor (but not trade) a system during its drawdown periods so that you can begin to trade it as soon as it shows signs of starting to perform well again. Paired together with any type of trading strategy, these two indicators can increase overall performance and strengthen your bottom line.
The JKM indicator is a 30-day moving average of your strategy?s equity curve. The idea is to trade a strategy only when the continuously paper-traded JKM is rising. For easier and quicker interpretations, the JKD indicator measures the difference in the JKM indicator from one day to the next. When the JKD is negative, the JKM is declining and, consequently, the strategy should not be traded in real time.
A Basic Strategy
To illustrate how these tools work, we?ll show how a trading system called JK-Call Buyer performs with and without them. The strategy we?ll look at has been tested over the full history of the NYSE futures, S&P 500 futures and the E-Mini futures with no changes made to the rules or the logic. So far, it has been more than 75 percent correct in all three markets.
The strategy works on end-of-day data and gives all trade signals as market orders the night prior to execution. Here it?s illustrated with the S&P 500 futures, but it can be used on individual stocks, as well as at-the-money call options. The strategy exits all trades after 10 days, regardless of any other factors.
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Thank you for your support.
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