How to avoid huge drawdown?

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How to avoid huge drawdown?

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Seeking Help Getting Started Machine Learning ETFs Risk Management

It's a ten-year backtest performance of the strategy, which is a daily momentum strategy on ETFs.

I suffer some huge drawdowns in the strategy. Should I change the logic, or add some modifications to the current code?

4 responses

i think that this is a strategy that does not work. and i think that tweaking it will probably not give good out of sample results. i personally would probably try a different approach.

look here for inspiration: http://alvarezquanttrading.com/2016/09/28/taming-high-return-and-high-risk/

The best ways to avoid huge drawdowns are:

Structure the list of symbols that will hedge portfolio naturally.
Remove stop loss orders - they will never prevent losses, just will take them.
Lower leverage especially in short positions during bull market .

i deleted ML logic and got pretty much the same results--i think the ML black magic is probably generating noise.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.