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Thank you Erich, for an excellent post!
A list like this is like a doctor's office: you rarely meat healthy people
there.
You sensitive guys: Don't take this wrong, I am not implying that you are
sick :-)))
It is just that if you are making good money you are less likely to spend
much time here.
Thanks again for your encouraging post, we newbies need that once in awhile
;-)
Lots of success and happy trading.
Herman
A one year old Canadian ;-)
At 09:12 AM 10/22/01 +0200, you wrote:
>Hello fellow traders
>
>I don't post very often to the list, but some times I like to throw a
>few ideas around. I have been trading actively for about ten years, and
>for the last three I have also included mechanical trading. Let me
>assure you, it does work. As they say, 95% of traders loose all their
>money within 6 to 9 months, or have to add extra money to their trading
>account. I have been able to live and purchase my house out of my
>trading account, so that should account for something.
>
>I have done extensive work to crack all the MS experts. None of them
>can be used without discretion. i.e. they will lose money in the long
>run if you just trade them.
>
>For example, someone asked about expectancy. Let us take a rather poor
>system like the MACD crossover. Over say a sample of 2000 charts, the
>system may give you say 8 correct signals out of every 10. Looks like a
>good system doesn't it, I mean 80% right, you cant loose.
>WWWRRRROOONNNGGGG.
>
>This is the point that most newbe traders miss. The system may be 80%
>correct, but have a look at what your commissions do to the system. Many
>of these profitable trades are not actually profitable. Now in reality
>the system only becomes about 25% correct. BTW a system can only make 1
>good trade out of every 10 an still be profitable if your losses a very
>small on the poor trades and your profit enormous on your one profitable
>trade. This is what is called expectancy. Although, I have never seen a
>system like this. All my systems that work are about 55% to 75% right.
>
>Carrying on with MACD, if you use it without discretion on the entire
>US market, it works out to be about 23% negative. i.e. you will loose
>23% of your money in 1 year if you use 2% commission charges.
>
>This same argument goes for most of the MS experts and systems, some
>are far worse, i.e. 225% negative. As I always say, it takes 5 years of
>study to become a doctor plus 2 years internship. Or 4 years to become
>an engineer plus 3 years practical. The same goes for trading. Don't
>even think that you will be any good after 6 months, this is not going
>to happen, never mind what the advertising bumpf says. Remember 95% of
>traders (not newbes only) loose their money.
>
>As you can see, I have said far to much already. The trading game is a
>zero sum game compared to an index. If you are doing better, you are
>taking money from someone else. And this is the point exactly, the
>market needs a constant supply of newbes to take money from. This may be
>in the form of books, courses, software, etc. MetaStock is a great
>package, you must just learn to use it correctly to your advantage.
>Study a few good trading books (van Tharp, Elder, Gary Smith, Kaufman,
>Bollinger), learn something about statistics (this is more important
>than you may think), but best of all; if you can pick a good traders
>brain, even if you have to pay for it, it will vastly improve your
>trading.
>
>Erich
>
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