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Every strategy has a limited lifespan. How do you decide when to stop a particular strategy as it has lost its edge? Few of things that can be thought is strategy crossing its maximum drawdown, net absolute loss

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    $\begingroup$ It doesn't have to be a binary decision. You can allocate risk to a strategy in proportion to its expected risk-adjusted return, taking into account the other opportunities available to you, its distributional properties (skew, convexity etc) and constraints (running costs, infrastructure requirements, capacity etc). If the expected return becomes negative, or below the fixed cost required to run the strategy, you turn it off. Of course, the hard part is evaluating this expectation! $\endgroup$ – Chris Taylor Sep 17 at 7:20
  • $\begingroup$ Thanks! However, if the strategy is trading futures, the idea being notional allocated per trade can not be anything but has to be multiple of lot size. In my case, that's why the binary decision to continue a particular strategy will make more sense. $\endgroup$ – Aditya Jain Sep 17 at 7:37

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