Rotational is a trend-following system that believes there’s always a bull market somewhere, and in previous downturns this year, the portfolio has been able to ride it out OK because it was in “what was working.” Not this time. Good in the straightaways, not so good in the turns.

This is the largest drawdown the system has generated in test or tracking. It’s important to remember that, no matter how long any system’s backtest, that its worst drawdown is always in front of it, just as its best performance is always in front of it. A backtest (or an actual trading return stream) is only a small sample from a larger heteroscedastic distribution, and as long as the recent results are within the same rough order of magnitude as the sample (they are), there’s no evidence of “brokenness.” In backtest, the system had a half-dozen drawdowns in the teens, and the current drawdown is 23.3% from peak equity, which is comparable to its backtested compounding rate and average annual return. It’s potentially unnerving, yes, but not outside of the expected range of results. The system doesn’t change, however. It just executes, regardless of circumstance, and while it does tend to to suck wind at turning points, it makes up for it in the straightaways - because there’s almost always something trending. We’ll see if the current leaders, stay leaders.

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