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Or just learn how to read the price action and employ a little discretion so
you can make your own trading decisions without any of these worries.
Bob
----- Original Message -----
From: "Brian" <blink64@xxxxxxxxx>
To: "List, Omega" <omega-list@xxxxxxxxxx>
Sent: Saturday, December 14, 2002 11:02 AM
Subject: RE: Limited life span of mechanical systems?
> Yes! And I would only add that if you really want to feel comfortable
> trading a system, you had better develop a plan for cutting off a system
and
> switching to another. Know where you will get out if the system heads
> south. Like discretionary trading, system "stop loses" can be the
achelies
> heel of system trading. This takes some work too because your less likely
> to think about your system stop loss than when descretionarily trading.
But
> if you really want to feel comfortable trading a system IMO this is
> critical. A system that's stopped working can lose money real fast. If
> you're not careful there can be a tendency to want to continue trading a
> system that is going through a "rough patch" thinking that it will come
back
> any day now. It's a lot like not taking loses. So have a plan to cut off
> and stick with it. I use a percentage of cumulative 3 months profit
before
> I bail.
>
> Then have a plan for getting back in. And there's the subjective part of
> system trading. While system rotation can be quantified, that's much
harder
> to factor into a backtest.
>
> B.
>
> -----Original Message-----
> From: Gary Fritz [mailto:fritz@xxxxxxxx]
> Sent: Friday, December 13, 2002 8:26 AM
> To: omega-list@xxxxxxxxxx
> Subject: Re: Limited life span of mechanical systems?
>
>
> > Therefor i think every system will eventualy keep on working. It's
> > just that the characteristics (like maxDD etc) might change so much
> > that it does not work for you anymore because it's getting to much for
> > you. But if the logic is good it might not work for a few years but
> > after that work like a "holy grail" again..... It's just... can you
> > bare the flat or drawdown periods....
>
> Which can be daunting. I've had systems perform very
> consistently for 3-5 years, and then suddenly heel over and die.
> Maybe some day they'll wake up again, but in the meantime they're
> losing money for 6 months or a year or more. If that was my only
> system, I'd be in serious trouble.
>
> Moral: don't put all your eggs in one basket. Even if you have
> one supersystem that's better than all your others, and you want
> to trade it exclusively, have other systems in reserve ready to
> swap in if your star suddenly flops. Better yet, trade them all
> at the same time to minimize the damage if one of them takes a
> dive. And hope they don't all take a dive at the same time.
>
> Be aware that you'll probably have to suffer through a protracted
> drawdown sometime in your trading career. Prepare for it so it
> doesn't kill you when it happens. Trust me, drawdowns are a LOT
> more painful in realtime than they are when you're looking at the
> equity curve in a backtest.
>
> Gary
>
>
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