Experiencing max DD
I need some help with my strategy.
So my strategy has these stats:
Win Ratio : 31.23%
Average R:R : 2.974
Expectancy : 0.241 (including assumed 14% trading costs and slippages, a question in itself 😅)
Max DD: 30.49 R
Stats on backtested 776 trades.
I have an algo programmed which takes these trades.
Three options I have to calculate position sizing:
According to max DD: 100/Max DD and further divided by two for safety which works out to 1.64%
According to Risk of Ruin (<0.3%) : 2.5%
According to Kelly’s criterion (divided by 4): 2.03%
Earlier I was risking 3% because the max DD was lower before. Currently I’m risking 2.5% on my running account balance.
My problems are:
I’m experiencing the Max DD currently and everything seems gloomy.
Even though the loss is not much in R terms, the loss is greater in $$. Meaning if I get a 20R trade, I will be probably be up by R a lot, but in $$ I will probably not even break even because of reduced $ risk per trade.
Should I just continue considering the sample size is good enough to have an edge?
Should I risk fixed % of initial capital or running capital balance?