Money Management

One way of reducing a system's drawdown and improving its performance is to use money management techniques. Using HistoryMakerTM, Money Management techniques can be tested independently of trade entry rules.

Successful techniques can be found by using a random entry and testing performance over many trials. Using synthetic data here means that valuable actual historical data are not wasted at this phase of system development. (By 'wasting' data we mean that the already limited historical data that are available should be used sparingly to avoid curve-fitting.)

Curve-fitting results when the optimum system parameters are determined on too little data and the system when actually traded never experiences the same market conditions as when it was optimised. This results in it either never raising signals or raising many signals in error

The conclusion is that by testing the system with synthetic data, a money management strategy can be found without fear of creating a system that has its money management rules tied to entry rules and, furthermore, it is not curve-fit to historical data.