Trend Following: How Great Traders Make Millions in Up or Down Markets

Appendix E. Critical Questions for Trading Systems

	There can never be surprises in logic.
	--Ludwig Wittgenstein[1]

There are many questions you should ask about your trading system. Here are a few:

1.	What have been the largest actual and simulated drawdowns you have experienced on a daily basis? What was the maximal loss in equity, simulated and actual, in a single day?
2.	What is the maximal number of consecutive losing months the system has sustained?
3.	How often do drawdowns occur?
4.	Are drawdowns typically short-lived, or do they develop gradually?
5.	On the average, how long does it take to recover all the losses incurred during a drawdown? What is the longest it has taken to complete a recovery?
6.	Is the risk of each trade calculated? If so, what ...