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Yuki,
With regard to stops, my take on it is as follows:
Some systems produce large winners and large losers. Some systems
produce small losers and small winners.
Stops work well for the former, because it cuts large losses early,
while letting large winners run.
Of course, the ideal is to have systems that produce small losers and
large winners, but it's not always easy.
Regards,
intermilan04
--- In amibroker@xxxxxxxxxxxxxxx, Yuki Taga <yukitaga@xxx> wrote:
>
> Hi Nick,
>
> Saturday, May 27, 2006, 8:14:09 PM, you wrote:
>
> NA> Just playing devils advocate but having tighter stops will also
lower your
> NA> percentage of winners if it takes out some of the big ones the
system may
> NA> become unviable. Tom, reading up on maximum adverse excursions
might be
> NA> useful. I'd go further than Keith if you optimised with in
sample test data
> NA> consider stopping right now. There is a lot more to system
design than just
> NA> 'a formula' (mentioned in your first post)....that's one reason
why I prefer
> NA> trading a 'method' (discretionary trading).
>
> A "method" is, by definition, a system. ^_^
>
> That said, the numbers I saw were not to my liking at all. Not
> close. Two few trades to rule out a large element of chance, just
> for starters. Too much drawdown, in any case, particularly since MSDD
> can always be expected to be somewhat greater in reality than in a
> backtest.
>
> I agree thoroughly however with those who have observed that stops
> virtually always are a cure that is worse than the disease. One
> needs a robust system, not an attempt to cure the terminally ill.
> Stops are an attempt to avoid outliers, and outliers are simply part
> of doing business. If one's system cannot deal with outliers on its
> own, it is likely not a very robust system.
>
> Yuki
>
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