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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 “buy and hold”. I have done extensive
> testing with Tradestation and Excel.
>
> To demonstrate to RTers how short term systems have problems outperforming a
> “buy and hold” 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 “buy and hold” 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 can’t 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 “properly” backtested their intraday systems and
> have created results that exceed “buy and hold”. I need the encouragement!
>
> Russ
Russ,
Your excellent research confirms my own anecdotal observations. Those
who confine themselves to day trading put an aritificial limit on
themselves that only serves to limit winning trades. You should
be a daytrader for your losing trades and let your winners ride as long
as necessary. Also, it is my observation that the more you trade the
less likely you are to make money. This is true for two reasons. 1)
Transaction cost will significantly erode any profits. 2) Trading
represents risk, the more you trade the more risk you are taking.
With an increase rate of trading your risk reward drops and your
transaction cost go up. But, don't try to tell any of this to the
daytrading junkies who are seeking the latest holly grail trading system
so they can get their daily fix of excitement in S&Ps. Afterall, 95% of
those trading are not in it for the profits, but rather for excitement,
the lifestyle (talk markets with my buddies), or to vent some
reoccurring neurosis, or some combination of the above.
Thanks,
Norman
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