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Hi Scot
Very interesting post. Should frighten the hell out of anyone operating
any of the 'systems' that are commonly advertised in Futures Magazine or
any other well-known trading publication.
Can you tell us any - repeat any - system you have so tested, in the manner
you have so stated, and what the results have been.
Once we know, I am sure the originator of the system will be inundated with
inquiries...
Bill Eykyn
-----Original Message-----
From: Scot Billington <scot.billington@xxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Tuesday, April 28, 1998 3:06 pm
Subject: Re: True Range Volatility Breakout
>>Date: Tue, 28 Apr 1998 08:40:59 -0500
>>To: tgparker@xxxxxxxxxxxxxxxx
>>From: Scot Billington <scot.billington@xxxxxxxxxxxxx>
>>Subject: Re: True Range Volatility Breakout
>>In-Reply-To: <3545C756.C1C9F1F4@xxxxxxxxxxxxxxxx>
>>References: <3545A112.3BCD4632@xxxxxxxx>
>>
>I would like to make some comments here that are critical, but not meant to
>be offensive.
>
>
>>>The trick seems to be picking the markets that seem to model the system
>>>best, and stay away from those that don't. Some markets have been a dream
>>>to trade, and then a couple of the grain markets almost destroyed me.
>>
>This is a prime example of curve fitting. If the technical system has a
>market edge it will work across all markets, and it is advisable to trade
>as many markets as possible. Certain market modes, i.e. trending or
>non-trending, will result in better returns for a given system. However,
>just because a particular market has trended well in the past few years
>does not make it more likely to trend in the future. If the system only
>'works' on a few markets, the system doesn't work.
>>
>>>Identifying and getting out of the "false breakouts" fast also seems to
be
>>>a necessary acquired skill that's cost me a lot of money to learn.
>>>
>>>I'm learning that the problem with "system" trading you have to somehow
>>>learn when to pay attention to the system and when to ignore it and
listen
>>>to common sense. The trouble with being a "newbie" is you don't know when
>>>the system is running you over a cliff.
>
>
>I think this comment is a good example of where most 'system' traders go
>wrong. Firstly, sometimes taking the signals and sometime listening to
>"common sense", is discretionary not systematic trading. Secondly, notice
>the undefined term "common sense". I find it impossible to create a
>working trading plan around "common sense".
>
>>>I got the feeling TRABOS is a rather "oldie but goodie" type of system..
>>>i.e.
>>>"cave-man" type of trading. Lot's of grunt work, and no heroics.
>
>Assuming heroics means enormous returns, this is another common mistake
>made by new traders. They forget the power of compounding and are
>facinated by grandiose claims. At 25% a year $25,000 turns into $888,178
>by the time your newborn can drive (You will need it for the insurance.).
>That year it will earn you $222,000 almost 10 times your initial
investment.
>
>My suggestion is to take the TRABOS system and CORRECTLY backtest it
>yourself on a portfolio of markets two from each sector, grains, meats,
>energy, currency, interest rates, stock index (one only). Follow the rules
>to the letter and use $150/round turn in commission and slippage over a 250
>trade sample. Run statistical tests every 50 trades to check the
>robustness of the system. If it is profitable, you should now have
>confidence to take every trade signal generated. If you are not, backtest
>another 250 trades or follow it realtime for several months. You now need
>to develop a money management strategy that will give you the return
>drawdown ratio that you find comfortable. I would figure out the
>probabilities of various drawdown levels etc. Lastly, you must develop the
>discipline to trade your new winning plan. Trade it for a month. Keep a
>diary and a log of each trade. If you skipped any signal or fudged any
>rule even if it resulted in more profit or less loss, your discipline needs
>work.
>
>
>
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