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Re: Unbelievable (was: Criteria for determing a "good" tradingsystem Part 2)



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At 6:48 PM -0500 3/27/02, Michael de la Maza wrote:

>I am constantly astonished by the "requirements" that retail traders
>need a mechanical trading system to meet before they are willing to
>trade it.
>
>An excellent example is below.  No mutual fund, hedge fund, commodity
>futures program, etc. in the history of the world has ever had a Sharpe
>ratio of 4 for any extended period of time (and an annualized return in
>excess of 15%).

Do not confuse the Sharpe Ratio of systems backtested in TradeStation
with the Sharpe Ratio obtained in real life by real traders or money
managers - the two are quite different.

The backtested ones do not include trading mistakes, data drop-outs,
going to lunch or to the bathroom, taking the afternoon off to run
errands, meet the in-laws at the station, etc., etc., etc.

All this real-world stuff will drop the backtested Sharpe Ratio by a
factor of two, at least...

Bob Fulks