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ATM
Draw Down Days
Last Activity 9/8/2019 11:15 AM
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jpb

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Location: Brown Deer, WI

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Subject : Draw Down Days
Posted : 10/18/2018 4:18 PM
Post #45605

I did some more dabbling. This thread originated out of some of the information Mark Holstius published on the Looking back - and Walking Forward thread.


I still don't know where this is going. But the data was too much unrelated to the rest of Mark's post that I didn't want to muddy it.

I merged the DD spreadsheet (from the other thread) with the analysis spreadsheet (from Using ATM to Improve ATM. I've attached a copy if you want to look at it. I must say that the version I grabbed and modified had a different purpose than analyzing the performance of a system. My source spreadsheet was one I was using to analyze strategies against the different market states and see which ones worked best in a given market state (the original purpose for the analysis spreadsheet). Given this, the results chart that I'm going to show below contains trades that would have been eliminated since the strategy would not have been active for a given market state. But the data was sufficient for me to look at DD vs Market States.

I see this analysis as useful in tuning the % of Equity at risk in a given market state. I'm thinking it is best performed after you've selected the strategies you want to run in a given market state and only have the new set of trades loaded into the spreadsheet (not everything such as I have here).



Let me take a few moments to discuss the content of this chart.

First You will notice a macro and micro market state called "Uncertain". This is the name I use to describe an overlap between Bull and Bear formulas. The market could be defined as being in either the Bull or the Bear. Instead of using concurrent market states, I defined a specific market state that covers these uncertain states.

Second The Total Days in MS is simply a count of the number of days the market fit a given MS formula. The States tab of the spreadsheet identifies the state of each day. I used the approach Mark Holstius outlined in another thread.

Third Total DD Days in MS is a count of the days where a draw down state was being recognized in a given Market State.

Fourth % of Days in DD is simply a division of the two prior columns. I find it interesting that over 50% of the time we are in a draw down state. This doesn't mean 50% of the time we are lower than the prior day, rather, we haven't yet recovered from a draw down. I actually expect this statistic to improve when the data represents selected strategies for each market state instead of all strategies for all market states. We certainly want to spend more time building equity instead of just getting back to break even.

Fifth Accumulated DD is a column that represents the addition of all the down days of the market state. The more important column is the next column called Average DD. I'm not sure what Average DD tells me. Does it mean that the Market State "Uncertain and Default" is the most likely to have larger down moves?

I expanded on that thought with the Rank column. It ranked the Average DD from the highest DD (#1) to lowest DD (#16). Then I averaged at a Macro State perspective the Ranks of each Macro State and did the same each of the Average DD in that Macro State. Lower Avg Macro Rank mean more likely to have a larger DD than a Market State with a higher average rank. Is this telling me that the Uncertain Macro State (the state that could be defined as both Bull and Bear given the overlap in the formula) is actually the most risky? Should I be cautious with my equity allocation in these states? Or perhaps these Uncertain states need different strategies?

Again, with the data I used, I don't think I can jump to a conclusion, more an indication of where I may need to be more careful. But then again, maybe it is a good representation of MS categorization and demonstrates a likelihood for a given market state to produce a draw down. Or maybe it is just nonsense.

Thoughts? Observations? Different interpretations?


P.S. The spreadsheet I attached was too large to upload without being compressed. Zip didn't get it small enough. I needed to us 7zip format. You can use 7-zip or PeaZip (both free software) to extract it. WinZip may have an ability to extract it as well.

[Edited by jpb on 10/18/2018 4:29 PM]

Attached file : DrawDownMktState.png (62KB - 262 downloads)
Attached file : Analyzing ATM Uncertain MS Trades Ver 1.xlsx.7z (6261KB - 0 downloads)

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bjmtigers

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Location: Tampa,FL

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Subject : RE: Draw Down Days
Posted : 10/26/2018 10:56 AM
Post #45608 - In reply to #45605

I have 7-zip installed and cannot download the file. Maybe Barry C has a suggestion.

Barry Meyer
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jpb

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Subject : RE: Draw Down Days
Posted : 10/26/2018 11:22 AM
Post #45609 - In reply to #45608

I tried to download it and got a server 500 error. I deleted the original and then uploaded another one but still got the server 500 error trying to down load it. I'll attach another copy to this message and see if it has any better luck.

Edit: Nope - still get the error with the copy attached here. I think someone at Nirvana will have to look at the server message to figure out why the server can't send it.

Edit 2: In the meantime, I've placed the spreadsheet on my google drive where you should be able to retrieve it.

[Edited by jpb on 10/26/2018 12:35 PM]

Attached file : Analyzing ATM Uncertain MS Trades Ver 1.xlsx.7z (6261KB - 0 downloads)

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