1 Hint to know if your Trading Strategy is Broken

1 Hint to know if your Trading Strategy is Broken:

A little unfiltered rant ↓

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"if equity curve falls below X, then assume that something is wrong with the strategy".

There's no perfect way to define X

But X should be an abnormally high amount of drawdown relative to the strength of the strategy that you are using.

Let's use the following "extreme example"

• If the average expected drawdown of your strategy over 300~ trades is -25% and you're down -37% by trade #30, something might be off.

The greater the distance that your equity curve falls below X , the greater the likelihood that the strategy was not profitable in the first place and perhaps previous backtests that were done on it were overfit.