But first, a few words about the system. It is based on the same logic as the systems in “System-testing redundancy” (Active Trader, February 2006) and “Medians on the move” (Active Trader, March 2006). It’s a simple crossover system that uses moving medians instead of moving averages to signal trades — that is, a buy is signaled when a shorter-term moving median crosses above a longer-term moving median and a sell occurs on a downside crossover.
Back to testing
Figure 3 shows the results from testing this system with a fixed-ratio money-management strategy that adds or subtracts one contract to the position size for every $10,000 change in
account equity. The starting equity was $30,000, $20,000 of which was used to trade two contracts initially. Trading this way would have made you the richest man in universe, with a final profit of $24,390,015,710,677 (and 20 cents), and the last trade would have consisted of 2,436,565,005 contracts in the E-Mini Nasdaq 100. Meanwhile, we also would have experienced a drawdown of appro x i m a t e l y $40,000,000,000,000 (more than 3,500 times the U.S. GDP). Naturally, these numbers are totally unrealistic, but they do underscore the powers of this money-management method. As the equity continued to grow,