Naturally, had I risked less, the drawdowns would have been smaller, but so
would the ending equity and possibly the Sharpe ratio also. Only the most risk-
seeking trader would trade this strategy as it stands here and now; for the rest of
us, it only serves as a good illustration of how risk and return go hand in hand.
Note also in Table 28.8 that the total number of trades comes out to 692,
which translates to only 23 trades per market tested over the entire testing period.
However, looking at Table 21.4, we can see that the system itself produces as many
as 62 signals per market over the same period. This means that only every third
signal will actually end up as a trade because of equity constraints.
Decreasing the fictive fwill allow for more trades and a higher Sharpe ratio
and possibly also a higher return. Thus, even though we’re making some 32 per-
cent per year, in this case we might be able to make more while risking less. This
is yet another little thread I leave for you to look into.STRATEGY 5
Long-term filter: RS system No. 1
Short-term systems: The trailing-stop version of the Harris 3L-R pattern
variation
Markets: 28 Dow stocks, 30 NASDAQ stocks for a total of 58 symacsThis and the next strategy are two good examples of when things don’t work out
as intended and it isn’t obvious what’s causing the problem. Tables 28.9 and 28.10
show that the trailing-stop version of the Harris 3L-R pattern variation system only
managed to produce an average annual return of 1.79 percent when traded on both
the Dow and the NASDAQ stocks, at a fictive risk of 2 and 0.5 percent, respec-
tively. These tables can be compared to Tables 14.6, 20.8, and 21.5.356 PART 4 Money Management
Profitability Trade statistics
End. Equity ($): 1,185,639 No. trades: 5,215
Total return (%): 19 Avg. trade ($): 36
Avg. annual ret. (%): 1.79 Avg. DIT: 2.9
Profit factor: 1.04 Avg. win/loss ($): 1,820 (1,361)
Avg. tied cap (%): 35 Lrg. win/loss ($): 24,178 (16,016)
Win. Months (%): 51 Win. trades (%): 41.6
Drawdown TIM (%): 99 10.1
Max DD (%): 24.1 Tr./Mark./Year: 9.1
Longest flat (M): 28.3 Tr./Month: 45.3TABLE 28.9
Strategy 5 Results