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Super, asset allocation or not the ideea is to make money and
not to loose them and if one have a good asset allocation strategy -
wich i belive is something that people like to read from books but
the reality is soooo different and tough, but then again it is my
opininion and i may be wrong on this one - then u don`t need a
trading strategy at all; on the other hand if u don`t have such
a "good asset allocation strategy" then u really need a system that
beats the market index as i have told u in the previous message and
thats all. The only "strategy/system/indicator" that could be
compared with a buy&hold would be one in wich i put arrows on the
chart after the fact like in many pretty movies or books about
trading given by so called "market pros" or gurus, because it is
somehow similar.
*PP
--- In equismetastock@xxxxxxxxxxxxxxx, superfragalist <no_reply@xxx>
wrote:
>
> I see your point and partially agree, but I look at it this way.
>
> In regard to buy and hold, there are two things that need
considering.
> One is taxes. Traders pay income tax on ordinary income, and buy &
> hold people pay taxes on capital gains. Not everyone trades in a tax
> free account.
>
> Some people justify trading by saying they're controlling risk.
Using
> a good asset allocation strategy controls risk far better than any
> trading method and has shown excellent long term consistent returns.
>
> Anyone not understanding the risk/reward ratio in asset allocation
> should probably start with The Four Pillars of Investing by William
> Bernstein.
>
> I have a portfolio based an asset allocation strategy, and it's done
> extremely well over the years I've used it. For example the
drawdowns
> in 2001 and 2002 were very, very small, in the 1 or 2% range, and
> since 2003 the total portfolio has more than doubled.
>
> I use the results from that asset allocation method as the buy and
> hold return I have to beat. If I can't make more trading AFTER TAX,
> why trade at all?
>
> Then of course there's the consistency issue. The asset allocation
> strategy performed more consistently over the last ten years than
any
> trading system I've seen with the exception of the one I wrote about
> in Roy's newsletter. Maybe there are others that are really
> consistent. I just haven't seen them.
>
> I certainly agree that any good trend trading system will avoid
years
> like 2001 and 2002, or if it's really special it will make money
> anyway. The trading rules in my system do exactly that.
>
> I've also tested my system using random entries with my exits, and
> also with my entries and fixed exits, like profit percent and days
in
> trade.
>
> The two things I checked for was did my system beat the random entry
> method, and how did the random entry method do yearly compared to my
> system.
>
> Using buy and hold doesn't mean not controlling for risk and
> drawdowns. The asset allocation model I mentioned controls for risk
> and has very low drawdowns. I'm not going to use a trading system
that
> gives me worse results. I'm in this to make money, so for me I
> definitely want it to beat the buy and hold method I would use.
>
> I agree that some traders compare their results to an index, which
is
> another comparison that is good for overall return, but as you said,
> not for controlling risk. It's a comparison that should be made, but
> not one I'm going to use as a deciding point on adopting a system.
>
> Super
>
>
>
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx, "csmp_pp" <paulyes@> wrote:
> >
> > hey super,
> >
> > Even tough overall u are extremely right about ADX, indicators,
gurus
> > and all...still there is something in ur judgement that is wrong
and
> > that is "beats buy and hold". A valid trading strategy tested on
a
> > portofolio of securities should keep u out of watter (thats
loosing
> > very little or just breakeven) when the market index makes huge
> > drawdowns like on 2001 and 2002 and beatting the index the rest
of
> > time and it should never be compared with buy and hold because if
u
> > do that u compare apples with...tomatoes. Such a strategy would
give
> > a anuallized compounded interest rate of over 20% wich is more
than
> > the return of the majority of mutual funds. Now if this strategy
has
> > decent drawdowns (about half of the anuallized compounded
interest
> > rate) then it should be considered a valid trading strategy and
from
> > my experience not many people have something like that. Further
on
> > for higher results (of course with higher risks) u could trade on
> > margin or use different money management, this will yield
different
> > returns, also the number of years will yield different returns
and so
> > on... there are a large numbers of variables that could lead u to
40-
> > 50% anuallized compounded interest rate. Over the years i saw a
lot
> > of people wich are pure gamblers and they not even know or
understand
> > that. On short buy and hold has nothing to do with trading and it
> > should never be compared with a trading strategy or the other way
> > around.
> >
> > *PP :)
> >
> > --- In equismetastock@xxxxxxxxxxxxxxx, superfragalist <no_reply@>
> > wrote:
> > >
> > > The ADX is so so like all indicators.
> > >
> > > When the market is going up 55% to 80% of all stocks are
rising. If
> > a
> > > random number generator were used to pick stocks for your
portfolio,
> > > the number of winners in your portfolio should match the overall
> > > percentage of stocks that have risen since the portfolio was
picked.
> > >
> > > Well, you don't like random number generators. You can not
handle
> > the
> > > psychological aspects of picking stocks randomly. It just
doesn't
> > make
> > > sense to you that it could work.
> > >
> > > So you develop a trading system using the ADX, or any other
> > indicator
> > > or combination of indicators. Wow, it beats buy and hold.
Really.
> > >
> > > Here are a few questions to ask.
> > >
> > > During what kind of markets does it beat buy and hold.
Downtrends?
> > > Uptrends? No trends?
> > >
> > > Is the system going to destroy your peace and sanity when it
starts
> > > it's huge drawdowns like it would have in 2001 and 2002
> > >
> > > Does it pick more winners than a random number system would?
Does it
> > > make more profit than a random number system?
> > >
> > > In what kinds of markets does it beat a random number system,
if it
> > > does at all.
> > >
> > > How does it do on a yearly basis over long periods of time.
Forget
> > the
> > > overall performance. How many times out of the last X years
would
> > you
> > > have quit trading it because you couldn't stand to lose like
that.
> > >
> > > Now do any of the books, articles and websites touting the ADX
or
> > any
> > > other indicator answer those questions. NO! Why not!
> > >
> > > Well, here is their answer.
> > >
> > > This fabulous indicator was developed by one of the world's
greatest
> > > traders and chart analyzers. It doesn't need to be tested
because if
> > > it comes from our guru, you know it's good just because he said
it
> > > was. He's written countless books and given lectures all over
the
> > > world. Forget the test results, you have our fabulous guru's
word
> > for it.
> > >
> > > Yeah, but I would still like to have my quesions answered.
> > >
> > > Okay, here's out answer. Since everyone uses indicators
differently;
> > > everyone has different trading skills; everyone trades a
different
> > > market, test results would be meaningless, so we just don't
publish
> > > them. Even if we did, no one would believe how good this is and
how
> > > rich it has made our famous guru. Don't you want to be rich?
> > >
> > > Here's my answer.
> > >
> > > Show me one system with the ADX, or any other indicator or
> > combination
> > > of indicators, that has beaten buy and hold, is consistent year
to
> > > year, beats a random number system and has rational drawdowns.
Show
> > me
> > > just one. Put a disclaimer on it telling me the blah, blah,
blah and
> > > I'll test it myself. If it does all those things, then I'm
going to
> > > take a serious look at the indicator that did all of that.
> > >
> > > I'm going to read all of your guru's books and kiss your guru's
> > ass.
> > >
> > > Then I'll find ways to incorporate this indicator into my style
of
> > > trading, and I'll develop a system that suits me now that
you've
> > shown
> > > me an indicator, or trading logic, that I can use as the base
for my
> > > own strategy.
> > >
> > > Don't take my word for it. Do the tests I've suggested with the
ADX
> > in
> > > any combination you choose and get back to me with the results.
> > >
> > > It's fairly easy to beat buy and hold. It's very difficult to
> > achieve
> > > consistency and to beat a random number trading system in a
specific
> > > market.
> > >
> > > Super
> > >
> > >
> > >
> > >
> > >
> > > --- In equismetastock@xxxxxxxxxxxxxxx, "Paul Harris"
<paul_vicmar@>
> > > wrote:
> > > >
> > > > Have recently been looking at Wilders Directional movement
system
> > and
> > > > reading about it on the web.
> > > > What are people´s experience using this sytem? How effective
is
> > it in
> > > > identifying trends etc...
> > > >
> > > > http://www.surefire-trading.com/tsl/tl/tl-71.html - ADX and
RSI
> > > > http://www.renegadetrader.com/ - Choosing stocks
> > > >
> > > > Thanxs in advance
> > > >
> > > > PAUL
> > > >
> > >
> >
>
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