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Hi Yuki,
I would disagree that a method is a system. However I would concede that a
system will utilise a method. E.g. buying breakouts is a method but you
would to nail down quite a few more variables to make a system based on this
method. Actually you would have to nail down quite a few more variables to
trade it (the method) full stop!
I guess its pedantic arguing about semantics but it is surprising how
different traders mean slightly different things when they use the same
terms. When people use the word system I always tend to think they are
talking about a fairly mechanical approach.
As I said I trade in a fairly discretionary way. I have recently been
persuaded to trade without stops (I have wide 'emergency' stops way away
from the market). The thinking is that when a key area breaks price will
often come back to that area from the other side allowing a scratch or at
least to stop out at a better price. Actually it may well continue in the
direction that was anticipated having taken out all the stops first! This is
somewhat contrary to conventional wisdom but seems to have merit to me. I
always have struggled finding the right stop, the market seems to have a
uncanny ability to seek them out where ever I put them now I don't have to
worry about that.
Cheers,
Nick
-----Original Message-----
From: amibroker@xxxxxxxxxxxxxxx [mailto:amibroker@xxxxxxxxxxxxxxx] On Behalf
Of Yuki Taga
Sent: 27 May 2006 12:53
To: Nick Ali
Subject: Re: [amibroker] Re: Is this a good system?
Hi Nick,
Saturday, May 27, 2006, 8:14:09 PM, you wrote:
NA> Just playing devils advocate but having tighter stops will also
NA> lower your percentage of winners if it takes out some of the big
NA> ones the system may become unviable. Tom, reading up on maximum
NA> adverse excursions might be useful. I'd go further than Keith if you
NA> optimised with in sample test data consider stopping right now.
NA> There is a lot more to system design than just 'a formula'
NA> (mentioned in your first post)....that's one reason why I prefer 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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