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This comparison is meaningless. Yes, with 20/20 hindsight a long position in
the S&P held from 1983 through the present would have been profitable, but what
about the drawdowns? Would you have held long through the Oct '87 "crash"?
Would you be prepared to buy one contract now and hold it for the next 14 years?
What if you had bought it in July '97? Your drawdown Monday would have been
nearly 150 big points, or $75,000. Do you think then market will continue to rise for
the next few years? I'm not saying it will not - just that I don't know. Somehow I
doubt it.
A good daytrading method has the potential to capture profits with reasonable risk
exposure, intraday only. Overall market direction is irrelevant. If the system or
method is profitable, and generates a reasonably smooth equity curve, then the
account equity will grow and the number of contracts traded can be increased.
This can ideally produce an exponential growth of equity which could soon eclipse
any long-term one-contract position. Alternatively, it can produce an income
stream which can be withdrawn and used for other purposes. Risk can be kept
under control by the use of reasonable stops. What would be a "reasonable" stop
for a buy and hold method in the S&P? If you are stopped out, with a huge loss,
would you have the courage and resources to re-enter?
With a good crystal ball you might do it! Personally, I have enough trouble trying to
figure out where price will be an hour from now, let alone in 10 years or more!
Bob Young
TWA7663@xxxxxxx wrote........
> I have recently been trying to find several intraday trading systems for the
> S&P that all together will exceed a buy and hold strategy. I realize that
> you would not buy a S&P futures contract and keep it for several years.
> However, that is the benchmark that I have used. I am sure the professional
> traders that use intraday systems will claim that their short term systems
> would do so. However, I have not been able to prove that several combined
> intraday systems can outperform obuy and holdoe. I have done extensive
> testing with Tradestation and Excel.
>
> To demonstrate to RTers how short term systems have problems outperforming a
> obuy and holdoe or any long term system, I offer the following calculations:
>
> Assume that you bought a S&P futures contract on 1/3/83 and continued to
> rollover until 10/13/97. Without commissions and slippage, you would have
> made $326,825. If you had bought one contract at the open and sold it at the
> close each day EVERYDAY, you would have only made $258,075. When you
> subtract a commission of $35 RT and 50 cents for slippage(small amount) you
> would have made $326,540 on the obuy and holdoe and with the short term system
> you would have lost $-807,540!
>
> WOW! I think that is a pretty impressive demonstration of why it is very
> difficult to make a profit year after year with very very short term systems.
> I am not claiming that a short term system or a combination of several short
> term systems canAEt do better than longer term systems. I am just showing why
> it is difficult.
>
> I realize that intraday systems don't buy at the open and sell at the close
> but the negative affects of the short term trading, commission and slippage
> are still there. In fact, it has been my experience that one can encounter
> more slippage intraday than at the open and close!
>
> If I am missing something here, then I would appreciate a counter argument
> because I truly seek intraday systems that will provide continued greater
> profit versus risk as compared to longer term systems. Also, I would like to
> hear from those that have oproperlyoe backtested their intraday systems and
> have created results that exceed obuy and holdoe. I need the encouragement!
>
> Russ
>
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