These changes certainly seem good. I looked at your “sneak preview” link. I’d like to provide some feedback.
- I noticed there were more than a few strategies that had a max DD near or above 40%. I randomly opened one of them to take a look. On several occasions, the strategy had trades that exceeded 14% DD. On another occasion, there was a nearly 21% DD on one trade.
This seems concerning. To lose 21% of the account on a single trades does seem excessive. If you had a $100,000 account, would you allow one trade to drop your account to $79,000? That in my eyes is very risky and fits the description of excessive. That shows that the trader either doesn’t manage risk well at all or simply doesn’t want to show a loss until it’s absolutely necessary at which point it’s probably beyond the point of OK.
At the time this particular strategy had a 21% drop on one trade, the capital was nearly $70,000 and this trade lost nearly $13,000. Further looking at the strategy stats, it has a win rate or nearly 70% with an average win of slightly less than $1400 and an average loss of slightly more than $1900. That means the expectancy of every trade is (1400 x 0.7) - (1900 x 0.3) = $410. This system expects to make only $410 every time it takes a trade. But it seems fine losing $13,000.
It would take 32 winning trades just to make back that one loss. That’s not counting future losses.
I’m not picking on this strategy and I won’t name it. I randomly opened one with a high DD amount and that’s what I immediately noticed. I’m sure if I opened others I’d notice things that stand out as red flags.
A strategy that has an expectation of making only $410 but is willing to lose $13,000 absolutely shouldn’t be on this new list.
You are absolutely correct on popularity. You actually shouldn’t give it any weighting. Just because people look at a strategy, doesn’t mean it’s a good strategy. Popularity doesn’t equate to good. So I commend you on lowering the weighting on that front. I’d actually recommend completely removing popularity as a variable.
Prop shops have a way to measure consistency in traders. To make sure no trades are out of norm. For example, assume a trader averages 1% DD on trades give or take. Then all of a sudden that trader has a trade that averaged 15% DD. That’s completely out of the norm for this trader. There are other ways to measure if a strategy is consistent. But the point is to add weight to consistency somehow.
The 6 month is somewhat off. You might have a strategy that only takes 1 trade a month. You might have a different strategy that takes 10 trades a day. To compare both those strategies isn’t comparing apples to apples. The strategy that takes 1 trade every month has only 6 trades. I personally think instead of an arbitrary time like 6 months, you can add weight to the number of trades. If one strategy gets to 50 trades or 100 trades for example, you give it more weight. In the example above, the strategy that takes 10 trades a day averages around 200 trades a month or 1200 trades over a 6 month span. You would be comparing a strategy that has 1200 trades where a clear patter has emerged to a strategy that has only 6 trades in the same timeline.
I’d love to hear your feedback on each of these points above please.
Keep up the good work and thank for for continuing to work toward improvement. I’m sure everyone appreciates that.