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Michael Crain <MichaelC@xxxxxxxxxxxxx> wrote:
> I have to agree with Robyn "a relatively small percentage of the
> trades accounted for a relatively large percentage of the
> gains....... I think it's prudent to throw out a handful of best
> and worst trades to eliminate the possibility that the system
> results aren't simply the result of luck (good luck or bad luck).".
Ordinarily I'd agree with you. Many systems will pop out the
occasional wildly successful trade, but you can't rely on those freak
trades in future trading. It's a good idea to toss out those
"outlier" trades so they don't skew your results.
However, that defeats the entire purpose of a trendfollowing system
like Aberration. By design, it catches unusual (aberrant) moves in
the market, and rides those moves. Many apparent breakouts will
really be fakeouts, so you take lots of smallish losses. But the
genuine aberrations, where the market breaks out and keeps going, is
where a breakout system earns its keep. Those large breakout trades
tend to be in the minority, and they tend to be much larger than the
average. But they are *exactly* what the system is designed to
catch. They're not freak occurrences that should be discarded;
they're a consistent feature (of SOME markets) that the system was
built to catch.
You have to be disciplined to trade a system like this. You never
know which trade is going to be the Big Winner that makes up for your
string of losses. Assuming the market doesn't drastically change
character, and continues to break out as it has in the past, then if
you faithfully take each and every trade, you should be able to rely
on catching those big trades in the future.
(On the other hand, if you have luck like mine, those big breakouts
will always happen when you're out of the country or otherwise unable
to trade it... :-)
Gary
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