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Hi Frank,
Good question. All of the systems were break out or trend following swing
systems (no day trades). We went through 5 systems like Aberration and
Dollar Trader. A good example would have been a single contract on Dollar
Trader with the following quantity of trades.
1972-1980 = 45 (gain $97,187 with one bad year of negative $1500)
1980-1990 = 73 (gain $140,137 with on bad year of negative $12,427)- that's
a hell of a nice 18 year run.
1996-present = 58 (11,067 with four bad years - two back to back $15,927)
Obviously there are a lot of indicators missing like sharp ratio, max DD per
trade, max DD, # days in DD, etc. It sure was a severe reality adjustment. I
had been going for longer lengths of time so as to make a system go through
different markets to increase probability of gain. What I didn't put on the
chat was that this was more a study of markets than systems as I noticed
that no matter the system, they would lose money on the BP. The person I was
working with had a long term background in the futures market and mentioned
that the BP had been a darling market in the 80s so we took it from there to
see the contrast. There are obviously quite a few systems that have very
good long term gains (10 years plus). All of the systems had very good gains
for the BP on the time segments mentioned earlier. Also the losses for the
last 6 plus years did vary by a good percent.
I like to use Futures Truth as a comparison because they only list systems
they have been able to paper trade to see actual results including
commission and slippage (and they track about 200 systems). They don't list
anything that they haven't personally tracked with the exception if the
person has actual brokerage statements for a couple of years. So you know
you're looking at an apples to apples comparison. There is the caveat that
if the systems trades a thin market you can't possibly use the system
results but when you're into S&P, Yen etc., then you have a pretty liquid
market (assuming you trade the currencies through the banks and not on the
floor) and the numbers should be close over a longer period of time.
One thing I have not reconciled is the comparison of number of trades rather
than over a period of time. A day trade system may make 3,000 trades in a 5
year period whereas a swing system would have to go 300 years to make that
many trades and how would it do over that period of trades rather than
looking at time. Although, for application purposes its no doable as you're
not going to trade for the next 300 years unless you're a vampire and plan
on living longer than that (I have heard there are some vampires in this
business).
OK, that's the long answer.
Regards,
Michael
PS - MARK WROTE ABOUT ABERRATION (what every market does have is a
personality and like a human these
traits can be identified and psychology applied to the subject to
obtain the maximum output of production like in a workplace
environment for example.)
He's right about every market having a personality except "psychology" will
do nothing but get you into trouble - systems testing is a much better
answer. Aberration is a good example where it does well in some markets and
terrible in others.
*********************
Michael,
how many trades did these systems generate (on average) between
1980-1990? How many trades did they generate since 1996?
Friday, February 21, 2003, 11:33:10 AM, you wrote:
MM> I wrote the statement below a few days ago and although no one on this
forum
MM> replied I did come up with some additional data that might be of
interest.
MM> We were researching what tends to be a very bad market on any system
that is
MM> tested on it - the British Pound. From 1996 to present, no matter what
MM> system tested (unless over-optimized), they all lost money. I'm talking
MM> about well known and very good performing systems. However, ALL of the
same
MM> systems made money (and nicely too, I might add) from 1980 to 1990.
These
MM> are all good systems that presently make consistent returns year in and
year
MM> out in other futures markets.
MM> Thought it might be of interest.
MM> Regards,
MM> Michael McGahee
MM> **************************
MM> I my investigation of systems and statistical probability I've gone down
the
MM> road that essentially says the longer the system survives with the least
MM> amount of draw down and the highest return (by tracking actual trades in
MM> very very liquid markets so as to minimize the possibility of over
MM> optimization) the higher the probability that I can rely on that system
MM> continuing to perform. As some of you know I've stated similar comments
in
MM> previous strings. This, of course, comes with the same caveat that past
or
MM> present performance is not indicative of future performance (which
applies
MM> to any theoretical or practical system).
MM> The above simple philosophy put into practice has led me to look at
certain
MM> data and systems from that point of view. The only limiting viewpoint
that
MM> I ask is to put forth ideas or postulates based on applicable material
and
MM> not to stray too far into the "theoretical" as that tends to muddy the
MM> water. The floor is open. Any takers?
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