Time (months) 2/88-6/95

Figure 7.2 Equity curve for deutsche mark system with multiple contracts.

provement in performance by going to a multiple-contract strategy. Of course, the drawdowns were higher as well. Let us look at the interval returns to better understand system performance.

Comparing Tables 7.5 for one contract and 7.8 for multiple con­tracts, you will see the big difference due to the variable contract strat­egy, since the quantities are three to four times larger in Table 7.8. For example, if we traded five contracts for the DM system from Table 7.5, the maximum drawdown for the 6-month interval would be -$26,315 (= 5 x $5,263). The variable-contract strategy (Table 7.8) produces a maximum 6-month loss of-$21,800, 17 percent smaller than the fixed 5x strategy. However, the fixed 5x strategy produces the same nominal net profit as the variable contract strategy. Thus, the "nonlinearity" of the variable-contracts logic can produce interesting results.

As in the single contract strategy, we round up the 1-month stand­ard deviation to $6,000 and use a 4x multiple, to estimate -$24,000 as the "worst" drawdown. Thus, for a $50,000 account this would be a per­formance band of 48 percent. It should be immediately obvious that we are practically overleveraging a $50,000 account with this multiple-con-

Interaction: System Design and Money Management 217

Table 7.8 Interval equity change analysis for the deutsche mark over 90 months with multiple contracts (2/88-6/95)