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Thanks for the comments. Everything you say is pretty spot on.
I thought I'd try the hysteresis money management and see how it did. So far, not so good, and unfortunately it looks like it will be a while before I can try again! I'm not 100% sold on its merits.
For the difference in averages, the one that always scares me is the development process having leaks. It is amazing how easily issues can crop up in testing. Sometimes the most innocent decision during development can lead to problems down the road.
With the mean reversion idea, IF you knew you had a current positive expectancy system (if you absolutely knew that your strategy would perform go forward at a certain rate, and that the market would not change), it would be easy. Sort of like having a bag with 5 red balls, and 5 black balls. If you were drawing without replacement, if you drew 4 red balls out (leaving 1 red and 5 black in the bag), you could start to bet heavily on black, since black is very likely the next few picks. But you'll never get that with a trading system, obviously.
I've developed 100's of trading systems over the years, they all work to a point at the time, then the market changes then it's adapting to the next method required to make $$$'s, it's never easy sadly.
Simple I think is key to long term profitable mainly cause it doesn't burn you out trading it.
Very interesting discussion here, glad I subscribed to this thread!
Interesting to learn how there are so many different ways to calculate if/when to add size, and even experienced guys such as yourselves are still questioning it.
Kev I like your charts with the expected mean from testing as a guide for future performance, even as a rough overview. I'll add similar to my list of sanity checks once I go live.
Not much going on the last 3 weeks. The volatility in the Euro just is not there. It will be interesting to see how the system responds when volatility increases, which it eventually will.
Right now, the system should have 20-25% more trades than it has (since the start of live trading).
Results through June 30. Still seriously underperforming expectations. I attribute a lot of this to the lower volatility of the Euro currency these past few months. Not an excuse, though.
If I had traded one contract throughout these past 10-11 months, I'd be up about $500. Of course, that is not what I did (I followed my position sizing rules), and I am down about $1,600.
As disappointing as this recent performance is, it is not totally surprising. Many times, strategies go through flat/down periods, before breaking out to new highs. Or breaking out to new lows. I hope it is the former!