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How could it happen? Let me count the ways:
- Poor system back testing methodology and/or
- Not a purely mechanical system (any trader discretion here?) and/or
- Not all trades taken (inadequate
capitalization/diversification/discipline) and/or
- Inadequate time of use of system (3 months in this case, very common
problem) and/or
- Poor match between system risk and trader personality and/or
- Poorly designed system (how many parameters? who set them?) and/or...
I'm a singin' the "System Trader Blues....."
Trader J
-----Original Message-----
From: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
To: David Olson <trader7@xxxxxxxxxxxxx>
Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Friday, July 31, 1998 8:54 AM
Subject: Re: Weintraub on Backtesting Questions
David, how could that happen. These systems were backtested on trade station
What happened? Who wrote the system. Was it the same guy wrote the "Birth of
the Blues."
-----Original Message-----
From: David Olson <trader7@xxxxxxxxxxxxx>
To: xet73@xxxxxxxxxxxxxx <xet73@xxxxxxxxxxxxxx>; Neal T. Weintraub
<thevindicator@xxxxxxxxxxx>; Steven Buss <sbuss@xxxxxxxxxxx>
Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Thursday, July 30, 1998 9:29 PM
Subject: Re: Weintraub on Backtesting Questions
I got into one of Robbins systems and lost over 50% in three months before I
bailed. Last time I do that.
Dave
-----Original Message-----
From: Peter Kiefer <xet73@xxxxxxxxxxxxxx>
To: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>; Steven Buss
<sbuss@xxxxxxxxxxx>
Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Wednesday, July 29, 1998 10:16 AM
Subject: Re: Weintraub on Backtesting Questions
>You can't be serious Allaron and Robbins are THE Worst .
>
>----------
>> From: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
>> To: Steven Buss <sbuss@xxxxxxxxxxx>
>> Cc: omega-list@xxxxxxxxxx
>> Subject: Re: Weintraub on Backtesting Questions
>> Date: 29 July 1998 17:26
>>
>> Steven, I did not know that I had to prepare an academic report. this is
>> merely my opinion from knowing hundreds of trading and lecturing around
>the
>> country for Omega and BMI. When I speak at Futures West, and Trading
>> Technology seminar is New York I will be more accurate. Perhaps, you can
>> give me a list of questions or should I ask them about their experiences
>> with such brokerage firms like Allaron and Robbins that market systems
>>
>>
>> -----Original Message-----
>> From: Steven Buss <sbuss@xxxxxxxxxxx>
>> To: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
>> Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
>> Date: Tuesday, July 28, 1998 9:12 AM
>> Subject: Re: Weintraub on Backtesting Questions
>>
>>
>> Comments inserted below.
>>
>> -----Original Message-----
>> From: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
>> To: Steven Buss <sbuss@xxxxxxxxxxx>
>> Date: Tuesday, July 28, 1998 7:47 AM
>> Subject: Re: Weintraub on Backtesting Questions
>>
>>
>> >Steve
>> >I will give Grant a call this evening and talk about this.
>>
>>
>> I'd love to hear more about what Grant says about preparing seriously to
>> trade the markets.
>>
>> >Back testing for futures is interesting and academic and may give you an
>> >indication but that is about it. It is not the Holy Grail.
>>
>>
>> An "indication" of what?
>>
>> So, your knowledge that backtesting provides interesting results that
>> provide little value other than academic knowledge is based on what....?
>> I'm looking for phrases like, "take a look at this book..." or "you know
>S&C
>> published this article not long ago..."
>>
>> I'd even settle for a "You know, I have access to a proprietary study
>done
>> by xyz trading company and they found...."
>>
>> No one on this list has used the word "Holy Grail" to describe the value
>of
>> backtesting that I know of so I don't know whose view you are arguing
>> against here.
>>
>> >Back testing is like predicting the weather based on every July 29th for
>> the
>> >past twenty years.
>>
>> And, your knowledge that backtesting provides as little predictive value
>of
>> the worth of a trading system as a prediction of the "weather on every
>July
>> 29th for the past twenty years" is based on what?
>>
>> >I spent six months doing consulting for Omega. I was in every nook.
>>
>> And, the "six months doing consulting for Omega" and the fact that you
>were
>> "in every nook" (whatever that means) provided you with what specific
>> information that has relevance to the issue of whether backtesting
>provides
>> value?
>>
>> > Let
>> >Omega trade a system
>>
>> And, whether or not "Omega" could trade a system has what specific
>relevance
>> to the issue of whether backtesting provides value or not?
>>
>> > After all even Boeing tests its own aircraft.
>>
>> And, whether or not Boeing tests its own aircraft has what specific
>> relevance to the issue of whether backtesting provides value or not?
>>
>> >the
>> >market will do what ever it takes to fool the most number of people.
>With
>> >all these back testers why are most people net losers?
>>
>>
>> So, what specific knowledge do you have about the relationship of the
>number
>> of folks who have done serious trading system backtesting to the number
>of
>> people who are net losers?
>>
>> >I know let,s back test that too!
>>
>>
>> By positioning yourself as a kind of "expert" on the markets (I'd be
>happy
>> to expound on the ways that you've done that if you like) it seems to me
>> that you'd want to substantiate the opinions that will appear in your
>book
>> and that you publish to the list or to its ftp site.
>>
>> IMO, the attempt at levity here does nothing to negate the fact that your
>> note doesn't substantiate your view that backtesting provides little
>value.
>>
>> I know that there are alot of folks who are members of this list
>(including
>> myself) who are sincerely and extremely interested in the backtesting
>value
>> question. If I may be so bold as to speak for some of these folks for a
>> moment, we just want to know whether there is substance to your views on
>> backtesting or whether you're just being chatty when you express them.
>>
>> Steven Buss
>> Who only wishes he had more expertise in backtesting trading systems
>>
>> >-----Original Message-----
>> >From: Steven Buss <sbuss@xxxxxxxxxxx>
>> >To: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
>> >Cc: Omega List <Omega-list@xxxxxxxxxx>
>> >Date: Tuesday, July 28, 1998 5:10 AM
>> >Subject: Weintraub on Backtesting Questions
>> >
>> >
>> >Neil,
>> >
>> >I'm trying to figure out what it is that you're saying about
>backtesting.
>> >In your interview with Grant Noble, he says on p. 6.
>> >
>> >"...You can have a good system but you don't trust it enough to follow
>> every
>> >signal. To get a system, you can trust and use, you must know its
>> parameters
>> >and strengths/weaknesses. In other words, you never are going to
>purchase a
>> >"system" whose results year and year out are better than the average
>trend
>> >following system. So you might as well design your own and stop
>frustrating
>> >yourself."
>> >
>> >And then you say:
>> >
>> >"Well, the people advertising trading systems won't like to hear this.
>And
>> >neither will people promoting back testing software packages."
>> >
>> >Question:
>> >
>> >What SPECIFICALLY is it that you believe Grant Noble said that back
>testing
>> >software package vendors won't want to hear? I would think that it is
>> >precisely system backtesting that would help to secure Mr. Noble's
>> suggested
>> >goal of "knowing...[a system's]...parameters and strengths/weakneses."
>I
>> >don't see anything that he said that would justify the last statement
>that
>> >you made. Your statement could imply that you believe software that may
>be
>> >used for backtesting, like TS, is no more valuable than some "trading
>> >system" software that can be purchased. Is this what you mean to imply?
>> Do
>> >you believe that backtesting a trading system doesn't provide value?
>> >
>> >On the following page the exchange goes like this:
>> >
>> >Grant: "The best advice is to read everything you can and practice
>before
>> >you trade real money. "It's amazing how people will spend years of study
>> and
>> >thousands of dollars to become a lawyer or a doctor, but somehow they
>think
>> >they can enter the high income profession of futures trader without
>doing a
>> >bit or preparation…Again and again I have seen public traders lose tens
>of
>> >thousands of dollars and be none the wiser after all their time and
>money.
>> >They should have put that lost 10,000 into buying every futures book
>they
>> >could find. All that time watching prices could have poured into a
>> >self-directed 'college course' learning about the market. "(Pg.46, "The
>> >Traders Edge"). Nothing is going to work until you have confidence it
>is
>> >going to work and that takes time."
>> >Neil: "So buying a piece of software won't cut it."
>> >Grant: "Right."
>> >
>> >Now again, your position, and Mr. Noble's, vis-a-vis trading system
>> >backtesting is unclear. I would think that backtesting is a terrific
>means
>> >of securing the objective Mr. Noble advocates of having confidence in a
>> >trading system. But Mr. Noble just advocates "practice." Does
>"practice"
>> >mean "paper trading"? I'm not clear that it could mean anything else
>> >because when you state that buying software won't help (including
>> >backtesting software like TS) Mr. Noble says "Right."
>> >
>> >I believe that if you explained your views on system backtesting clearly
>> and
>> >in detail to the list you'd get alot of feedback, which is, I assume,
>your
>> >purpose in posting the interview to the Omega list FTP site.
>> >
>> >If, in fact, you don't believe backtesting a system, using software like
>> TS,
>> >provides value, it would be helpful if you could point to your own
>> >experience with backtesting systems that led you to such a view or to
>other
>> >materials upon which your view is based.
>> >
>> >Steven Buss
>> >Walnut Creek, CA
>> >sbuss@xxxxxxxxxxx
>> >"There's nothing more practical than good theory."
>> >
>> >
>>
>
>
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