Chapter 12  The composition of a trading system(1)

The composition of a trading system(1)-Pic no.1

Out of the eight different structures mentioned earlier, the most complex one is the combination of multiple varieties, multiple timeframes, and multiple models. While this combination usually generates the smoothest capital curve, it is still vulnerable to extreme market scenarios where all varieties, timeframes, and models are disadvantageous during a certain trading period. These low-frequency, high-loss events are inevitable and can cause a significant drawdown in the capital curve. From a model design perspective, the drawdown of the trading model's capital curve is a process of releasing risk. To minimize drawdown, traders may encounter an unprecedentedly large drawdown at least once in their long trading career, similar to a big eruption

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