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> if what you say is true about aberration and the s&p's (i have no
> reason to doubt you), then that explains why mark johnson doesn't
> trade the damn thing on the stock indices. it appears to blow up
> when it encounters excessive volatility.
No, not excess volatility -- excess non-trendiness.
The S&P is notoriously anti-trending. That's why "buy the dips"
works -- if it's going down now, chances are it will go up soon. In
a trending market, if it's going down now, chances are it will KEEP
going down. Statistical measures of the S&P show it's non-trending
at any time frame above about 1-2min bars, and even those small time
frames are marginal.
(And yes, I know you can look at an S&P chart and see clear trends.
So can I. But we all know the human eye can see all kinds of
"patterns" that aren't really there if you rigorously test it.
According to 3 or 4 different objective measures of "trendiness," the
S&P flunks.)
Aberration is a trend-follower. Put it on the S&P and it will fall
flat on its face. And a Jeep will look terrible at the Indy 500, and
a F1 race car will do lousy on mountain backroads. That's just not
what they're designed for.
But throw Aberration at currencies, bonds, coffee, OJ, things that
trend nicely, and it does pretty damn well. You'll still have some
nasty drawdowns, but if you trade a basket of *trending* commodities
they'll tend to even out. You'll find that Aberration does well on
the same markets that other breakout/trendfollower systems do well
on, but I believe Aberration does better than most.
A friend of mine who's been studying breakout systems for 15 years
says Aberration is just about the best thing he's seen on a
risk/return basis -- at least the best of the EOD breakout/
trendfollower breed. Just today he showed me the results of one of
his optimization tests. This wasn't a simple TS optimization, but a
general-purpose trend-following model with lots of degrees of freedom
and self-optimization logic to find the "best" solution based on your
criteria. And in a large subset of breakout/trendfollowing models,
this program self-optimizes to something very close to Aberration.
I'm with Mark, I prefer the shorter-term counter-trend model. But if
you *want* to do EOD trend-following, Aberration seems to be a pretty
decent way to do it.
> and it also sounds like that not only is the system itself is curve
> fit, but the basket of commodities is curve fit too.
The basket isn't really curve fit. It's not hard to find which
markets tend to trend better than others. Stock indices are probably
the worst. Currencies, interest rates, and some physical commodities
trend very nicely, and those are the ones to throw Aberration at.
Gary
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