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---Posted for Metastock List---copied to MetastockUsers list----
I would not usually respond to an obviously combative two line email that does not support its
statements without explanation. However, in this case, I feel compelled--more for the benefit of
the people reading than for the original poster.
Over the past several months, there's been lots of discussion on list whether totally mechanical
system trading can actually work, or whether it's all some kind of bad joke. Some people say they
know it doesn't work because, apparently, they tried it, and they were unsuccessful.
I want to offer a different point of view. Longtime members of this list know that Steve and the
many other valuable contributors have made this an indispensible forum. I first lurked, listened,
learned, then slowly started contributing. All along the way, the trading ideas and personal
experiences that the many contributors have shared in their posts have kept me going in spite of
the miserable failures that we all face as we slog through the many variants of unsuccessful
systems. Believing that it could be done from friends off list as well as those on list was the
most important thing that kept me coming back.
I had a great discussion with another trading friend of mine last night about mechanical systems.
Most of the words and ideas below are his. I thanked him privately for sharing this as well as
thanking him publicly now.
For my part, I *know* you can trade successfully with totally mechanical systems. I've done it
myself, though still on a small scale. A friend of mine, who lives less than a mile from me, has
been doing it very successfully for several years. He started with a $20,000 account two years
ago and has built it up to many times that. (He's being modest when he tells me this, I know
better; the number is much higher than you are thinking....)
He has been so successful, in fact, that he and a partner have formed a fund and are now trading
client money, entirely using his systems. As part of the process of registering the fund, they
had to provide audited results to be verified by the NFA. Not theoretical backtest results, but
real-money account statements.
You can see this record documented at his CTA website. Go to http://www.BlackthorneCapital.com
and choose the "Blackthorne Capital at a Glance" link. The returns shown there assume a low level
of leverage, since large investors tend to use low leverage and want to see low drawdowns. In
reality my friend uses a higher level of leverage in his personal account, and he achieved much
higher returns than those shown on the website.
This is not speculation; this is documented actual performance, all based on a mechanical system.
If they had falsified this information, they would be at risk for serious fines or worse.
And my friend is just a little guy in the trading world. Many of the largest CTAs in the business
use mechanical trading approaches to manage huge amounts of money. It's necessary because it's
very difficult to analyze enough markets to handle hundreds of millions of dollars with
discretionary approaches.
For additional proof that systematic trading works, try looking at some of the CTA reporting
services. For example:
* Toby Crabel http://iasg.pertrac2000.com/SnapshotPT.asp?ID=82
* William Eckhardt http://iasg.pertrac2000.com/SnapshotPT.asp?ID=105
* Sunrise http://iasg.pertrac2000.com/SnapshotPT.asp?ID=357
Many other large CTAs use total or near-total mechanical methods. These are just a few large CTAs
who happen to explicitly describe their systematic approach in their summaries.
Nobody ever said it was easy. Something that can make you this much money is not likely to drop
into your lap. It takes a lot of work, study, experimentation, and willingness to take risks.
But it *CAN* be done, it *IS* being done by a lot of people, and it *CAN* be done by normal people
like us. My friend is proof of that.
===================
Dave Nadeau
Fort Collins, CO
=====
Dave Nadeau
Fort Collins, CO
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