both the Harris 3L-R pattern variation and the expert exits system, and the trail-
ing-stop version of the Harris 3L-R pattern variation.
With a fictive risk of 3 percent per trade for all system–market combinations,
the average annual return comes out to close to 8 percent, with a maximum draw-
down of 21 percent. The Sharpe ratio comes out to 0.81. Although the average
annual return is slightly lower than that for a buy-and-hold strategy on the Dow
Jones index, a higher Sharpe ratio and a lower maximum drawdown make this
strategy a comparable alternative to the buy-and-hold (although it wouldn’t have
hurt if both the percentage of winning months and winning trades had been a tad
higher).
One way to increase the return—or at least the Sharpe ratio (in the form of
lower drawdowns)—would be to not trade the same 10 stocks with all systems.
Making sure all groups hold a different set of stocks would increase the diversifi-
cation further and thereby also decrease the risk. Decreasing the risk would in turn
allow us to trade the system more aggressively, which would further increase the
returns. This would also increase the historical drawdowns somewhat, but judging
by Figure 28.12, the drawdowns leading up to the current bear market are very
modest. If we can keep the current drawdown under control, increasing the aver-
age drawdown wouldn’t do that much as long as we also can increase the return
and the Sharpe ratio.STRATEGY 9
Long-term filter: Rotation
Short-term systems: The trailing-stop versions of the hybrid system No. 1,
Meander system v.1.0, and the volume-weighted average system
Markets: 10 Dow stocks, 10 NASDAQ stocks, for a total of 60 symacsCHAPTER 28 Combined Money Market Strategies 363
Profitability Trade statistics
End. Equity ($): 2,706,109 No. trades: 2,860
Total return (%): 171 Avg. trade ($): 597
Avg. annual ret. (%): 10.95 Avg. DIT: 5.2
Profit factor: 1.12 Avg. win/loss ($): 11,542 (10,471)
Avg. tied cap (%): 68 Lrg. win/loss ($): 201,288 (129,841)
Win. Months (%): 58 Win. trades (%): 49.9
Drawdown TIM (%): 99 9.6
Max DD (%): 40.9 Tr./Mark./Year: 5.0
Longest flat (M): 20.8 Tr./Month: 24.9TABLE 28.13
Strategy 9 Results