Let me explain with an example, why is the return of accumulated profit from above for trend-following systems is normal, which, certainly, difficult at first, but with an understanding of the processes taking place, addiction gradually occurs. To make it clearer — for example, opened a position, she went in our direction, accumulated profit 100 rubles, then the price went against us until 70 rubles, where we closed the position. That is, given from above 30 rubles, eventually earning 70.
Для примера возьмем дневной schedule фьючерса на Медь , since last summer. Two simple systems on Donchian channels will act as average traders. One trader это канал Дончиана с периодом 40 — that is, this is the one, who does not close all positions at the slightest hint of a reversal, but patiently waits for correction, if a, of course it will work out, that is, it will not touch a relatively long trailing stop. The second trader is the Donchian channel with a period 10 — that is, the one that, at every hint of correction, closes positions in a panic, and then opens again according to the trend — that is, it fusses and twitches.
Here are the positions of the first trader. Apparently she was only one. Opened a position last summer, waited all the corrections and only recently closed the position, Earning 24 000 Dollars.
The second trader fussed about, then opened positions, then at the slightest danger closed. As a result, there were many deals, but it turned out to be of little use. Interestingly, even on such an uptrend, as a result, I managed to get a loss. And even more interesting, that despite the fact that he has four times less risk, the drawdown was more than twice that of the first trader. Also, slippage costs were not taken into account here., which will add even more negativity.
Certainly, I agree, what if the trader has a psychic ability to guess peaks and troughs, then he does not need any trend tracking systems and he will never have drawdowns. Therefore, this example does not apply to them.. In fact, this is just an illustration of the rationale for the inevitability of drawdowns., and for any systems, not necessarily trend following.
Yes, and this example is exclusively for American futures only. Promotions (American, Russians) and RTS have completely different characteristics.
