To the pro traders:

What do you do when the past two years of a WFA (10-15 year period) had an increasing loss (2017 = -4%, 2018 = -8%) while the other years were profitable?

Do you modify the strategy? Do you conclude that it's not profitable? Or do you ignore this because the average gain on 10-15 year period is positive?

What is your experience and what do you do typically do with a situation like this?

  • Impossible to answer. What is your goal? Alpha? Beta? Sharpe? Something else? – Money Ann Jan 19 at 0:15
  • Hi, lets say objective function is Sharpe. and i encounter this scenario, what would you suggest the next approach? Im thinking to examine the strategy and see if the market is reasonable enough why its a loss. Or i could set a wider range for the optimisation parameter? – Francis Jan 20 at 23:51
  • I'm not suggesting anything unless you want to pay me, but if looking at Sharpe you'd look at Sharpe over the whole period and see if the result is good enough. If you have some rule like "overall Sharpe must be >X, but Sharpe must also be >Y in every year" then you apply that. Sounds like you are asking us something only you can answer. – Money Ann Jan 20 at 23:59
  • Basically, Im literally confuse to interpret the results of my WFA. I can either, abandon, improve, or continue trading it. My question is all about which is the right path to take or any guiding principle. Sharpe ratio is just another variable, I wanted to look at the bigger picture whether to abandon, improve or continue trading it. – Francis Jan 21 at 0:33

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