New Big Bamboo Data: 8% Stops with 2% Risk
This system has been stopping out of many trades over the past month. These trades would have been profitable had a looser stop been applied. BHH suggested that the best stop should be developed independently of the equity curve. Once the optimum stop has been identified, position-sizing would then be used to create the equity curve that is consistent with one’s goals, psychology, and tolerance for risk.
The above stats compare the basic system, which uses a 4% stop with 1% risk per trade against an 8% stop and 2% risked per trade. When using a percent-risk formula for position-sizing, a larger stop means a smaller position. We know that a larger stop is needed to adapt to the increased volatility. The 8% stop with 2% risk accomplishes the goal of increasing the win percentage while maintaing a nice equity curve.
I included commissions of 1 penny per share, and .2% slippage on each trade. The 8%/2% model increased the win percentage to 76%, which is a significant improvement over the 4%/1% model. The drawdown increased minimally. CAGR climbed to a phenomenal 131%.
Note that the statistics above cover only 1 year of data.
The equity curve shows that both models track very similarly until volatlity increases. Once the increased volatility takes hold, the 8% stop continues to perform well while the 4% stop model begins to suffer.
Â
Draw Down Percentage from Highest Equity is also promising. While the 8%/2% model has a larger draw down between trades 58 and 66, note that the 8% stop has completely avoided the draw down in which the 4% stop is currently languishing.
I’m seriously considering changing the Big Bamboo System to an 8%/2% model, but I have a strong feeling that as soon as I do, volatility will taper off, and the change will have been unnecessary. If any changes are going to be made, I will likely decide after this week.
Thanks for your work on this; I enjoy seeing you tweak your system. Proper risk management is a big priority in my own trading right now.
November 17th, 2008 at 11:24 pmOzark, its the only thing making the market any fun.
However, bhh is the brains behind the cool spreadsheets.
November 17th, 2008 at 11:33 pmWoodshedder is too kind, I just happen to know a few extra excel commands.
November 18th, 2008 at 12:03 amTrying this thing out…
November 18th, 2008 at 1:12 amSweet. This shit will never be on my blog. I keeps it old school.
Enjoy
November 18th, 2008 at 1:14 amI hoping J can make it where I don't lose all the comments on the older posts. That would be a great loss.
November 18th, 2008 at 1:15 ami'll import old comments in the morning
November 18th, 2008 at 1:41 amWhat ze fuq is dis?
November 18th, 2008 at 3:48 amInitial impression: not bad. Definitely 'new school'.
November 18th, 2008 at 3:54 amPlus you learn interesting details, like Woodshedder commenting/commiserating with the 'enemy'/Slope of Hope.
Lol@DPeezy. Did I comment one time over there?
November 18th, 2008 at 8:27 amOh wow…it saves all your comments. I must maintain control now.
November 18th, 2008 at 8:28 amtesting… 1,2,3
November 18th, 2008 at 10:14 amDpeezy said: What ze fuq is dis?
My comment exactly when looking at the markets each morning.
November 18th, 2008 at 10:17 amyou can always be logged off and type in an anon or something if you don't want your comment tracked
November 18th, 2008 at 10:18 amoops I guess it tracks ip or something so changing name means nothing
November 18th, 2008 at 10:19 amSo adapt parameters to volatility environment - which tends to persist. It may smack of best fitting, but it strikes me that it is appropriate for this model.
November 18th, 2008 at 10:36 amJeff, absolutely. We are working on a component that is completely adaptable. Right now we are just trying to determine the boundaries.
There is nothing wrong with adjusting percentage stops to deal with increased volatility. That sort of tweak does not invalidate the core concept of the strategy.
November 18th, 2008 at 10:40 amWTF??
I FUCKING HATE DISQUS!!!
It's why I do not post on Timmah's blog anymore… I cannot even get ON it from my home comp.
November 18th, 2008 at 11:05 amI do like looking at Boca's purty picture, though. That's a bonus, I guess. And Jana's but she never posts here anyway.
November 18th, 2008 at 11:06 amGood!
November 18th, 2008 at 11:06 amWow, you obviously need a better computer. If it can't even run the internets, it's time for an upgrade.
November 18th, 2008 at 11:11 amIts okay Jake, you shun my blog anyway.
November 18th, 2008 at 11:26 amNo question about that. My home comp is egregiously old. But its got so much shit on it that I dread transitioning to a new model, even though I know it'll make my life hundreds of times easier.
_____________
November 18th, 2008 at 11:27 amI don't, actually. I just don't often have a comment, since we are so frequently in agreement.
___
November 18th, 2008 at 11:28 amlol, buy a portable hard drive, put all your shit on it; upgrade; and then copy back over the things you need. Plus, this way you have a backup as well. Which is always important.
Nice Yoda avatar. boca of course still takes the cake. By a country mile.
November 18th, 2008 at 11:35 amI have actually done all that backup hard drive stuff already, what do I look like, post 47.5?
I just dread any technology changeover whatsoever. It's a curmudgeon thing.
November 18th, 2008 at 11:39 amYep, like that Yoda avatar LOL.
Of course, you know my avatar is from the front cover of a fantasy book, right?
I can't load Disqus from my handheld Nokia tablet computer, have to be on one of my regular PC's.
November 18th, 2008 at 11:40 amYour level of curmudgeonry would put any 47.5+ year old to shame.
Technology is your friend.
November 18th, 2008 at 11:44 amThat's because I was born 47.5, with a cigar in my mouth, and have gotten older since.
I just got my “Edgar G. Robinson” - level Curmudgeon Belt in the mail the other day.
________
November 18th, 2008 at 11:50 amlol…I hope that doesn't make me curmudgeonly.
November 18th, 2008 at 11:52 amHmmmm, which “fantasy” might that be, B?
November 18th, 2008 at 12:08 pmNever fear, you're in no danger of being a curmudgeon Shed, I ought to know because I live with one.
November 18th, 2008 at 12:20 pmThe Riddle: The Second Book of Pellinor by Allison Croggon
here it is on Amazon
http://www.amazon.com/Riddle-Second-Book-Pellin...
Just to make this stock-related, because we're having entirely too much fun with the new Disqus setup….
the sales on BKS have dropped off a cliff, apparently the same cliff EBAY and AMZN tumbled over.
November 18th, 2008 at 12:25 pmlol, from one of the reviews:
“For the duration of it's page count, Alison's story swept my world away and deliciously ate at my usual sleep schedule, and only with the gray and blue hues of the approaching dawn was I forced to put down this wonderful piece of fiction.”
Well shit, that book sounds better than sex. Speaking of which: long CHD. Cause even in times of recession/depression, people are going to have sex. Probably even more so than usual.
November 18th, 2008 at 12:35 pmLOL, good point, long CHD and in nine months long PG (don't they make Pampers?)
November 18th, 2008 at 12:47 pm“Pellinor, ” eh? Damn, the Tolkien estate should be dunning every one of these copy cats. Of course, reading the summary, it looks like she ripped off Donaldson as well.
Aside: Tried re-reading Donaldson's stuff, twenty five plus years later (I read all his Chronicles stuff when I was 12-13) and I literally could not get through it. Talk about tedious.
November 18th, 2008 at 1:01 pmBoca, what's up with the points on Disqus? What do they mean? How do you add or subtract them?
November 18th, 2008 at 1:10 pmClick the up or down arrows.
If you sort by different options it rates this reply as shit.
November 18th, 2008 at 1:15 pmCan you expand/collapse the different threads?
November 18th, 2008 at 1:23 pmThat would make this much sweeter.
A long time ago you used to get points just for making a response (unless that was Howard who gave me points just for responding hah). The system looks a different now, somewhat like karma like 4FL3X mentioned, although I'm not sure how you see total points.
November 18th, 2008 at 1:26 pmNot that I know of. If you click Option at the top you can click sort by newest etc.
November 18th, 2008 at 1:33 pmBtw, the only reason I'm on Woods blog is because of the new comments system. I didn't want anyone thinking I care what his wood stick system is saying…
November 18th, 2008 at 1:44 pmlol@4fl3X
At least your civil.
November 18th, 2008 at 1:46 pmCan't say I did this Disqus thing. Makes it difficult to follow a chain of conversation.
November 18th, 2008 at 7:07 pmdisqus blows
November 18th, 2008 at 7:12 pm