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07-14-2005, 05:34 PM
I Am Now reading Smarter Trading. Risk is defined by him as volatility. Volatility = Risk appears to be the egy from what I have read on trading. For instance - maximum drawdown is equated with danger, which is not anything more than a measure of volatility.
But here's the thing I can not escape from my head - should not we be a lot more worried about the chances that a egy will recuperate than we are with how volitile the equity curve is? I'd much rather trade a system that is volatile having an 95% likelihood of recovering from almost any drawdown compared to a smooth system using a 70% likelihood of recovering from any drawdown (other variables being equal).
Are there some helpful metrics out there which quantify a systems capacity to recoup from drawdown (without caring how volatile what is?)
Are there some other essential approaches to defining danger?
Thank you Ahead of Time.
James
But here's the thing I can not escape from my head - should not we be a lot more worried about the chances that a egy will recuperate than we are with how volitile the equity curve is? I'd much rather trade a system that is volatile having an 95% likelihood of recovering from almost any drawdown compared to a smooth system using a 70% likelihood of recovering from any drawdown (other variables being equal).
Are there some helpful metrics out there which quantify a systems capacity to recoup from drawdown (without caring how volatile what is?)
Are there some other essential approaches to defining danger?
Thank you Ahead of Time.
James