Choosing between two similar systems
Posted: Thu Jan 06, 2011 11:19 am
I wanted to see what people's thoughts are on the following:
I have two systems that I have been backtesting for a long time, as well as running them "on paper" for over a year. Having recently bought TB, I've re-run the backtests and walk-forwards as I find this technology much easier to use than my former software. This testing has all been done at the request of some peers that will be putting their money into a small CPO that will lock everybody up for a decade (to avoid anyone getting cold feet and trying to pull out in the middle of a drawdown) and trade the system with minimal discretion on the GP's part when it comes to the trades. [As an aside, I'm not a neophyte to derivatives, having spent time on the CBOE floor and then later trading futures/forex as a risk manager; however, trend following ("TF") as a strategy is both new and intriguing to me]
Both systems are TF systems. Across multiple timeframes and 52 markets, system A has a MAR of 1.2, while system B has a MAR around 1.0. The main difference is the total number of trades: system A has 2x the number of system B.
The initial reaction is to use System B -- less slippage, less commissions, less active management of trades, less change for human error, and so forth.
Is there any arguments to be made for using System A? I'm thinking that the potential negative costs in the real world stemming from a doubling of trades is not worth the incremental increase in MAR.
Thoughts?
I have two systems that I have been backtesting for a long time, as well as running them "on paper" for over a year. Having recently bought TB, I've re-run the backtests and walk-forwards as I find this technology much easier to use than my former software. This testing has all been done at the request of some peers that will be putting their money into a small CPO that will lock everybody up for a decade (to avoid anyone getting cold feet and trying to pull out in the middle of a drawdown) and trade the system with minimal discretion on the GP's part when it comes to the trades. [As an aside, I'm not a neophyte to derivatives, having spent time on the CBOE floor and then later trading futures/forex as a risk manager; however, trend following ("TF") as a strategy is both new and intriguing to me]
Both systems are TF systems. Across multiple timeframes and 52 markets, system A has a MAR of 1.2, while system B has a MAR around 1.0. The main difference is the total number of trades: system A has 2x the number of system B.
The initial reaction is to use System B -- less slippage, less commissions, less active management of trades, less change for human error, and so forth.
Is there any arguments to be made for using System A? I'm thinking that the potential negative costs in the real world stemming from a doubling of trades is not worth the incremental increase in MAR.
Thoughts?