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I am against EA's and I have explained already severall times the reasons for that.
But ES if I can make some comments and a sujestion:
First you start some competion with a rule that I never understood.
a maximmum intraday drawdown of 12% from an Aal time high on the equity curve ?!...
For all the same that EA started from 10K$ made a 15% drawdown on its initial balance (1500$) but ended the year with 200% profit (20K$)
What is wrong with that ?...on the contrary that is a R/R ratio of 6.6!!
Now you do the compleet opposite and you ask for an EA that makes 30% in a year but for all the same it makes somewhere a long the line a draw down of 50%.
I sujest that you maybe start again some sort of a competion (or whatever kind of a testing period) where you have 2 rules but realistic rules.
1st rule: the EA can not loos more then 30% of its initial capital.
If one starts to trade and is not prepared to loos 30% of his initial capital then one should better leave his money in the bank on a saving account.
But that rule stays during the whole period of the test. Meaning that some EA's work with a compounding element. Then the draw downs can be bigger on the capital that one has on that partical moment. On that moment you need to calculate what the drawdown would be without the compounding strategy on again that draw down can not be bigger then a loss of 30% of the initial balance. The reason for this is that the the point or moment that an EA starts to trade is an arbitrairy discission. Witch means that what ever kind of moment that one would have started with the trading or test the drawdown can not be bigger then 30% of the starting capital or as I said a R/R raio higher then 2 ex. making 50% and a MaxDD of 10% on intial capital
2nd rule: the R/R ratio should be at the end of the testing period at least 2 or higher.
Meaning that your total profit should be at least 2 x times higher then the biggest draw down that you had. ex. the system makes 2000pips or higher and the MaxDD was 1000pips or lower.
Some people will think that a R/R ratio of 2 is way to low. But I can asure you that if you go to a conservative investor with realy BIG capital and you can show 100% proof that he can make a yearly 15% profit for him with a maximum risk on his capital of only 7.5%, he wil ask you: where do I need to sign the papers. ( it does not ned to be 15 and 7.5 because we all know that you can adjust your levergae in such a way that it can be 30% profit and 15% drawdown)
Problem here on this forum is that people dream of making 100% per month. On a yearly base this comes to 1000% but that means also that your biggest drawdown is 500%. Meaning that you can burn your initial capital 5 x times.
With these 2 rules you judge a system or an EA in a 100% professional way. This is the ONLY way how professionals judge a system
All other judgements are based on your personal expectations and have nothing to do with REAL trading or REAL expectations and what a normall system will produce in reward and in risk on your initial capital.
friendly regards...iGoR
Last edited by iGoR; 10-25-2008 at 08:35 PM.
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