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Thanks to Michael (Paauwe that is <> not Mermer <g>) for a
fantastic analysis far beyond the others I got for the subject.
On my own testing I always look a the Equity curve developing over
time. You can easily isolated wins which brings up ther performance
to big total numbers, but will not hold up over time
rgds hans
ps - nothing snipped below , to good to be snipped
> Michael Mermer and some brokers have been promoting the ETS system
> lately. It's only $25 to Futures Truth for a published report so I
> checked it out. Since late October 1997, performance has been good.
> For the very short period before that, real time performance was
> reasonably good on the daily bar, but flat on daytrading, after
> giving back some big gains.
>
> In total, for the 9 month period ended December 31, 1997, it has
> been profitable on the S&P, but with high drawdown. However, you
> really need to compare performance on the S&P to that of 'buy and
> hold' during the same period.
>
> Futures Truth has only tracked this system since March 31, 1997.
> They said before that "this system was previously available but has
> some subjectivity in the rules." Mermer assured the list via Deming
> that it's all mechanical, so you can now hold him to produce and
> publish a proper backtest. Trading 101.
>
> Before getting excited reading the broker ads and thinking about how
> much money you are going to make on the ETS system, read the recent
> post by Tom Cathey on "Futures Truth and System Promotion". It
> contains realistic comments on the subject.
>
> Just because brokers say it's ranked top ten by Futures Truth,
> doesn't really mean much at all. Often it's just a 'short term
> blip'. Especially with mechanical S&P500 daytrader systems. They
> tend to break quickly and not stand up over extended tests,
> constantly needing periodic adjustment (read re-optimization) of the
> parameters. There are very few exceptions.
>
> Before purchasing or trading ETS for daytrading the S&P 500, or any
> other market, request that the vendor or the broker produce a
> detailed extended backtest, for at least a five to ten year period
> before March 31, 1997. There is really no valid excuse for not
> producing it, unless there is something to hide. Otherwise, it's
> just another sucker's game, plain and simple.
>
> The same trading rules that are promoted as working so well in TS
> based ETS after March 31, 1997 must have also worked before then, so
> don't accept excuses.
>
> Never justify use of an S&P daytrader system based on only the
> recent few months performance. That is essentially what the public
> is being asked to do by daytrading the ETS system based on only the
> Futures Truth report. Before bolting in and day trading it, as a
> starting point, ask for a 'complete' proper back test. Chances are
> you'll be glad you did.
>
> Here's the highlights from the Futures Truth published report:
> ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
>
> Trading S&P 500 on the daily bar:
> +++++++++++++++++++++++++++++++++
>
> Drawdown is high and performance is well below a buy and hold
> comparison.
> **See the buy and hold benchmark below, and compare profitability & maximum
> drawdown.
>
> March 31,1997 to current date of report December 31, 1997: Net
> Profit of $32,375 with Max Drawdown of $39,825. This compares to
> $108,790 and $36,245 on a Buy and Hold. Between August 97 and
> December 97 ETS lost $39,525 on daily bars, giving back more than
> half of what it made in the earlier part of the year.
>
> Trading the currencies - the JY, SF, & BP:
> +++++++++++++++++++++++++++++++++++++++++
>
> It's a NET LOSER on currencies during the reporting period. It lost
> $7,137.50 on the BP, Lost $2,450 on the SF, made $1,787.50 on the
> JY. The Win Ratio was 33%.
>
> Trading Bonds:
> +++++++++++++
>
> It made $8,325 with a max drawdown of $3,612.50 with a 44.% win
> ratio. BUT....$7143 of the total gain is from only ONE TRADE.
>
> Daytrading the S&P 500:
> ++++++++++++++++++++++
>
> Published results are available from Futures Truth from March 31,
> 1997 to December 31 1997.
>
> On the first 39 trades it LOST $6,400 net. Then it made $49,000 on
> one big trade during the crash in October 1997. For the 9 months
> ended December 31, 1997 it made a total of $57,237 with a Max
> Drawdown was $35,725. Except for the big outlier and the drawdown,
> at first that seems pretty good, until you compare those results to
> the Buy and Hold benchmark below.** If you deduct the one big winner
> as an outlier, it made only $8,337.50. This system is better than
> many, but for how long does it really stand the test? Based on the
> reported drawdown, you need about a +-US$50,000 account to daytrade
> it.
>
> Whenever a short term mechanical trading system gets a
> disproportionate part of the total gain from one trade, you have to
> be careful with the model and discount those results somewhat from
> the analysis. It is a good basic practice to just toss out the
> biggest winner and look at the rest of the trades, because the
> realistic expectation of average trade (win & loss) is one of the
> most important elements to look for in any system.
> ____________________________________________________________________
> ______
>
> Get the full report from Futures Truth and judge for yourself.
> Better still, before even considering trading it, get the 'complete'
> multi-year quarter by quarter backtest from the broker or vendor. It
> has to exist, it can be produced and it will contain a much more
> complete picture than the 9 month Futures Truth published report.
>
> **Here's the comparative Buy and Hold benchmark, run out on the cash index
> for convenience, for the 9 month period reported.
>
>
> Buy & Hold $SPX-Daily 03/31/97 - 12/31/97 Rolls quarterly for
> comparison
>
> Performance Summary: All Trades
>
> Total net profit $ 108790.00 Open position P/L $ -2030.00
> Gross profit $ 108790.00 Gross loss $ 0.00
>
> Total # of trades 3 Percent profitable 100%
> Number winning trades 3 Number losing trades 0
>
> Largest winning trade $ 44520.00 Largest losing trade $ 0.00
> Average winning trade $ 36263.33 Average losing trade $ 0.00
> Ratio avg win/avg loss 100.00 Avg trade(win & loss) $ 36263.33
>
> Max consec. winners 3 Max consec. losers 0
> Avg # bars in winners 56 Avg # bars in losers 0
>
> Max intraday drawdown $ -36245.00
> Profit factor 100.00 Max # contracts held 1
> Account size required $ 48245.00 Return on account 225%
>
>
> This is not a solicitation of any kind. See the vendor's CFTC
> Disclosure Statement.
>
>
>
>
>
>
>
>
> Michael Paauwe
> mpaauwe@xxxxxxxxxx
>
~~~~~
You wont achieve anything by being afraid.......
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