If you know of any examples of systems that were going well with drawdowns <20% for a reasonable amount of time (say at least 6 months) but then failed could you please post the names or links. Thanks.
look at the My Analyst sections of people who posted in forums at least 8-12 months ago - it is a rich source of bad fields…
RT Hedge LT
MBN-1 seems a good example of a system that had excellent performance for its first 6 months, but disappointed afterwards. Jules’ example is a good one too, although there were early warning signs that it might not be able to continue its historical performance as the vendor started to hold very concentrated positions. I was subscribed before the collapse, but was able to get out before things got out of control.
I don’t know the exact background of your question, but I assume that you want to get an idea what the chances are a good-looking system will continue to outperform in the future. With that question in mind I did a little analysis on stocks systems a few months ago and posted it on my blog. I’ve copied the relevant parts below:
(Note that the results below might not tell the entire story, because they don’t take into account that we’ve been in a bull market most of the time. You might see very different performance if the next 6 months would be a bear market)
What I did a few weeks ago was to select all stock systems with at least a 1-year history (on C2). I then selected only those with a Sharpe ratio of at least 2 in the first year (250 trading days) since they appeared on C2. Finally, I calculated the Sharpe ratio over the period after the first year (not taking into account slippage and transaction cost). The underlying idea is: Suppose we would pick systems with Sharpe ratios > 2 and at least a 1 year history, how would they do afterwards.
The results are very interesting. I found 6 systems trading stocks with Sharpe ratio’s >2 in their first year:
Mutual Fund Trader 2.25
extreme-os 4.53
vicinoo! trading - Daytrading 2.74
Tango 3.64
MBN-1 2.03
Weekend Trader 2.28
These are the Sharpe ratios I calculated for the period after the first year (note the length of this period is different per system, with the shortest being 89 trading days for MBN-1 and the longest being 399 days for Mutual Fund Trader):
Mutual Fund Trader 1.09
extreme-os 3.87
vicinoo! trading - Daytrading 2.48
Tango 2.03
MBN-1 -0.18
Weekend Trader 1.19
we did a thread about Mountain systems recently that discussed many systems just like this, last post probably about 2 months ago.
