Easily incorporate equity curve feedback techniques into either your own strategies or use it as a filter for other trading strategies. Many times tracking the equity curve of strategies can help automatically determine which systems should be on or off. For example, you can turn off a trading system when the equity curve takes a big dip or you can select the system with the best equity curve. These types of tweaks can help improve already good systems.
Some trading systems will have prolonged periods of winning or losing trades. Wouldn’t it be nice if you could avoid those long drawdown periods? Trading the equity curve or equity curve feedback is one way to do just that.
Try applying a 20-trade or 50-trade moving average (this will depend upon your trading system and your personal preference) to your your trading system’s equity curve. Plot this smoothed equity curve along side your true equity curve (see image below). When the equity curve falls below the smoothed equity curve you can stop trading your system or reduce your contract size.
Stop trading when your equity curve falls below the moving average (pink line)!
Trading the equity curve is like trading a basic moving average crossover system. When the fast moving average (your equity curve) crosses over the slower moving average (your smoothed equity curve) you go long (trade your system live). When the fast moving average crosses under the slower moving average you close your long trade (stop trading your live system).
Our Equity Curve Feedback Toolkit allows your system to trade in simulation mode so that it will continue to generate an equity curve. The Equity Curve Feedback Toolkit will only allocate real trades when the trend of the equity curve is up.
Here is an equity curve of a system that has a long drawdown period. Using this toolkit we can have our live system stop trading during this period.
Now look at the final equity curve as we significantly reduce large drawdowns.
You can quickly test our Equity Curve Feedback Toolkit on your current trading systems. You will insert the function we provide into your base strategy and make a slight modification to the signal. You don’t have to re-program any of your strategies.
You get all these tools!
All Open Source!
This toolkit does not just give you the simulated equity curve of your trading system. It contains an entire Equity Curve Analysis Library which you can use in your own systems! Check this out...
EasyLanguage Functions Within The Equity Curve Analysis Library
Determines the current state of the last intermarket signal.
Determines the current state of a simple moving average crossover.
Determines the current state of a triple simple moving average crossover.
Allows you to access each of the simulated trades' P&L values.
Returns to you the simulated equity curve's current value.
Returns the MaxDrawdown for signal values over the complete time period
Returns the current equity value for long signals over the time period to current bar
Returns MaxDrawdown for long signals the complete time period to current bar
Returns current equity value for short signal over the time period to current bar
Returns MaxDrawdown for short signal trades over the time period to current bar
Returns winning Percentage both long and short to current bar
Returns winning Percentage long to current bar
Returns winning Percentage short to current bar
Immediate download available.
You'll get the Equity Curve Feedback Toolkit as an EasyLanguage ELD which can be imported into your TradeStation platform. You will also get a user manual explaining the Tookkits features.
Murray Ruggiero is the chief systems designer, and market analyst at Tuttle Tactical Management. He is one of the world’s foremost experts on the use of intermarket and trend analysis in locating and confirming developing price moves in the markets. Murray is often referred to in the industry as the Einstein of Wall Street.
As chief systems designer, Murray digs into the depths of niche and sub-markets, developing very specialized programs to take advantage of opportunities that often escape the public eye, and even experienced high level money managers.