RSI(2) - Part 3

We tested various stop levels and found that a 25% stoploss per position improves performance slightly.

Equity

Statistics

	All trades	Long trades	Short trades
Initial capital	50000.00	50000.00	50000.00
Ending capital	1575730.25	1575730.25	50000.00
Net Profit	1525730.25	1525730.25	0.00
Net Profit %	3051.46%	3051.46%	0.00%
Exposure %	54.05%	54.05%	0.00%
Net Risk Adjusted Return %	5645.44%	5645.44%	N/A
Annual Return %	21.13%	21.13%	0.00%
Risk Adjusted Return %	39.09%	39.09%	N/A
Total transaction costs	196027.88	196027.88	0.00
All trades	5173	5173 (100.00 %)	0 (0.00 %)
Avg. Profit/Loss	294.94	294.94	N/A
Avg. Profit/Loss %	0.70%	0.70%	N/A
Avg. Bars Held	5.78	5.78	N/A
Winners	3549 (68.61 %)	3549 (68.61 %)	0 (0.00 %)
Total Profit	5022498.99	5022498.99	0.00
Avg. Profit	1415.19	1415.19	N/A
Avg. Profit %	2.65%	2.65%	N/A
Avg. Bars Held	4.31	4.31	N/A
Max. Consecutive	46	46	0
Largest win	26166.12	26166.12	0.00
# bars in largest win	4	4	0
Losers	1624 (31.39 %)	1624 (31.39 %)	0 (0.00 %)
Total Loss	-3496768.74	-3496768.74	0.00
Avg. Loss	-2153.18	-2153.18	N/A
Avg. Loss %	-3.57%	-3.57%	N/A
Avg. Bars Held	9.00	9.00	N/A
Max. Consecutive	11	11	0
Largest loss	-33512.58	-33512.58	0.00
# bars in largest loss	23	23	0
Max. trade drawdown	-36610.02	-36610.02	0.00
Max. trade % drawdown	-48.35	-48.35	0.00
Max. system drawdown	-201851.90	-201851.90	0.00
Max. system % drawdown	-29.95%	-29.95%	0.00%
Recovery Factor	7.56	7.56	N/A
CAR/MaxDD	0.71	0.71	N/A
RAR/MaxDD	1.31	1.31	N/A
Profit Factor	1.44	1.44	N/A
Payoff Ratio	0.66	0.66	N/A
Standard Error	113785.34	113785.34	0.00
Risk-Reward Ratio	0.78	0.78	N/A
Ulcer Index	4.90	4.90	0.00
Ulcer Performance Index	3.21	3.21	N/A
Sharpe Ratio of trades	0.83	0.83	0.00
K-Ratio	0.06	0.06	N/A

Drawdowns

Conclusion

Using a 25% stop loss degrades our performance both with lower returns and larger drawdowns. This is as we would expect to see with any mean reversion system. A 25% stoploss is quite large even considering that we only put 10% of our capital into a single position, but depending on risk tolerance a 2.5% loss in a single position is tolerable and allows us to have a defined risk system.

If you look you will notice that the maximum position drawdown is still well over our 25% stoploss at 48.35% which is due to a large gap down. This is always a risk when holding positions overnight and why it is important to never have too much capital in one position or sector.