Controlling Drawdown

[Anonymous]

Hi Petko,

From what I understand you typically achieve 20+% monthly returns. What % equity drawdowns do you typically get along with this or what is a typical monthly return/drawdown ratio for you even?

Also do you have any techniques or suggestions to control the drawdown? I expect its to do with putting together a balanced portfolio so that different timeframes on same pair and different pairs have their drawdowns at different times? This can be quite hard to backtest of course since currently the EA studio portfolio only handles multiple strategies for for same pair and timeframe.

[Anonymous]

Hey Samuel,

That is an intelligent question with a complicated answer! :)

Yep, you are right. The more assets you trade, the lower drawdown you will achieve.

But I really can’t say something super smart about it as a solution. It depends on so many different things. Especially when there is a war going on and the markets are unpredictable.

One of the solutions to lower the drawdown is to decrease the trading size of the EAs. Of course, this way, you will reduce your chances of profits, but I guess it depends on how risky the type of trader you are.

[Anonymous]

Hi Petko,

Yeah its more a good R/D (>1) I am aiming for rather than just a small drawdown. I’m aiming to have a go at some trading challenges like FTMO, myforexfunds etc and they all require about a 10% profit with a maximum 10% drawdown in a month so I figure if I can keep my R/D > 1 then have a decent shot of passing.

Sounds like we agree on the diversity of assets and strategies being the best way of controlling drawdown. I do include it when I am filtering strategies but I feel a well put together portfolio would have a much bigger effect on controlling drawdown.

Its also a shame the EA studio cant create a combined portfolio of different assets so can see the true combined drawdown.

Currently I just sum the drawdowns for all the pair portfolios and then multiply by a factor of 0.6 as an estimate, assuming that its reasonably conservative that most will be on their worst drawdown at the exact same time. I’m sure in many cases it would be a lot lower than this though but its the best I have come up with for the time being though.

[Anonymous]

Hey Samuel,

It is not a shame for EA Studio but MetaTrader. The developer, Mr. Popov, is so good that he can do everything.

BUT MetaTrader does not allow it. You can not trade different assets on one chart in MetaTrader.

This is why he is now preparing different products for different platforms like Trading View.

MetaTrader is the best so far, but there are many limitations, so the EA Studio has to follow along.

 

[Anonymous]

Hey Petko,

I didn’t explain myself well there.

It’s fine that the portfolio EA is for one asset (which I agree is a MT4 limitation anyway).

More what I thought would be a good feature would be if EA studio could simply allow us to see the backtesting results for a combined portfolio of assets? That way we would get a better idea of how our portfolios on different assets are complimenting each other.

But of course we can only download a portfolio EA for a single asset and timeframe but that’s probably best for tracking purposes anyway.

I’m pretty sure it’s a feature that Miroslav could implement. It’s not critical, but would be nice.

Hope that makes sense. And I agree MT4 is the best in my opinion also

[Anonymous]

Hey Samuel,

I got your point. And it makes sense.

We can suggest that to him, I will take a note.

I will let you know.

[Author]

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