PDS has been suffering a drawdown recently. And while the drawdown appears to be fairly normal, it is always healthy to take a look under the system’s hood, to be sure that everything is okay. Much like a doctor giving a patient an EKG, I have processed crucial data to determine whether or not everything is running within normal parameters. Based on the control charts below, the system appears to be experiencing a normal cycle of under-performance, and does not appear to be developing any abnormal traits.
20 Trade Moving Average of each Trade’s Profit/Loss
I know, it sounds complicated. It is not. Here is how it is figured.
- Get the % profit/loss of each trade.
- Average the % profit/loss of the first 20 trades.
- Create a moving average where the 1st trade is dropped from the average and trade 21 is added to the average. Repeat until the moving average is run through all the trades.
- Plot it.
Click on the chart to enlarge…
There have been 4 times in the past 10 years when PDS has seen the 20 trade moving average dip to the current level. From here I expect it to begin to retrace back to the average, which is 1.74%. Should the 20 trade average hang around here for several months or more, or dip significantly lower than -4.00%, it would be abnormal.
20 Trade Moving Average of the Winning %
This metric is calculated the same way as the 20 trade moving average of each trade’s profit or loss.
Again we see that the 20 trade average of the winning % is stretched, but does not appear to have exceeded normal parameters. I expect this metric to begin to climb back to its average of 68.7%.
Dr. Woodshedder’s Diagnosis
My diagnosis is for continued system trading diligence as PDS will likely roar back to life over the next several months. For anyone interested in trying out the system, historically (as the above charts show), now would be an excellent time to give it a try.