Percentage of profitable intervals (90 total) for DM using 65sma-3cc

1 2 3 4 5 6 12 month months months months months months months

Figure 6.16 Proportion of profitable intervals shows that this system tends to have fewer unprofitable intervals as the length of the interval increases.

Analysis of Monthly Equity Changes 199

tracts with rollovers and a $5,000 initial stop. As usual, we allow $100 for slippage and commissions. The $1,500 stop trails from the point of highest equity for long and short trades. The net paper profit was $7,500, with a profit factor of 1.12, and a drawdown of-$15,515. These results were somewhat worse than not using a trailing stop at all. How­ever, the net profit analysis does not provide the additional insight sketched below.

Figure 6.17 compares the average monthly equity changes with and without a trailing stop for the 65sma-3cc system. There is litde doubt that the trailing stop significantly reduces average monthly performance. You should expect the drop in monthly performance since the net profit with the trailing stop was $7,500 versus $24,900 without the trailing stop. A key point not evident from the profit summary, but clearly visible in Figure 6.17 is the performance at the 12-month level, which strongly favors not using a trailing stop.

Unfortunately, the trailing stop also had the effect of reducing the proportion of profitable intervals. The trailing stop did litde to improve