I thought this was an interesting question for further disussion. Is this the consensus view of the drawdown reduction threshold? What are counterarguments, if any? Do the benefits of using the DRT outweigh the downside Alp points out? The DRT makes my own, primitive systems more palatable, so I think there is something there. But what I would really like to know are the thoughts of some of the more experienced traders and system designers in here. Any feedback is appreciated.
Could you expand on the false premises of the drawdown reduction threshold?
As I see it, the drawdown reduction threshold is based on the assumption that one can predict the clustering of winning and losing trades which, by the way, is the same assumption of the "trade if last is a winner" rule. These rules contradict the basic trading system's philosophy of not being able to predict the future. In other words, for me they look like cognitive biases translated into system rules.