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Breakout systems are usually a good systems strategy.....however, they stink
with range-bound markets. Everytime a breakout occurs, an immediate reversal
occurs or the price goes no where.
What's the answer here ?
1) attempt to build in some intelligence to your system to detect
range-bound vs. trending conditions.
(this is easier said than done !) and then AUTOMATICALLY adjust the signals
to accomodate.
2) reserve a parm that will indicate based on your "feeling" what "mode" the
system should be in.
The idea here is that the more input you give can give your system, usually
the less "dumb" trades it makes.
However, give it too much input and you will discover that it trades too
infrequently to be any better than discretionary trading.
3) trade multiple systems simulataneously and hope one will be "hot" enough
in the current climate to make up for the losses of the others that are not
well suited to the current climate.
this is a good post for someone who has been burnt by trading "simple"
systems
why doesn't someone start a website: www.simpletradingsystemssuck.com
The posts to the newsgroups can be from all of the bankrupt day traders who
were caught in the "trap" of assuming market conditions are stationary.
> -----Original Message-----
> From: Jimmy56@aol.com [mailto:Jimmy56@aol.com]
> Sent: Sunday, November 05, 2000 3:35 AM
> To: rcavaler@optonline.net; omega-list@eskimo.com
> Subject: Re: ** Successful, Robust Systems Anyone ?? ***
>
>
> In a message dated 11/4/2000 9:26:29 PM Pacific Standard Time,
> rcavaler@optonline.net writes:
>
> << - It's profitability ratio over a variety of different equities is
> consistently greater than 65% (i.e. 65% of the time, you are in the
> green)
> - It performs well in both trending markets, *and* range-bound markets.
> (perhaps using adaptive properties based market conditions of a given
> stock)
> - It does not require constant re-tuning or optimization to achieve
> satisfactory results (this would just be curve backfiting) >>
>
>
> I think this is pretty much unrealistic. You either want to go for a
> "trending" system, a "buy-low sell-high" system (which is hard) or a
> "volitility breakout" system. Volitility Breakout Systems will
> give you your
> 60 to 80 percent winning trades but with only a 1 to 1 win/loss
> ratio. The
> trending system will give you 30 to 50 precent winning trades,
> but with a 2
> to 4 win/loss ratio. That's pretty much what I've come to
> expect, and, as
> far as I'm concerned, that is the Holy Grail, because if it's a
> good version
> of those concepts, it will be robust and therefore it will make money for
> you. Losses are the cost of doing business. I will gladly lose
> $100 to make
> $250 50 % of the time any day.
> Just my humble opinon.
> Jim
>
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