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Kevin -
I think the point is that Ray has a plan that he uses and has developed
into a winning strategy which goes well with his own make-up. I do not
have the stomach myself for position trades in futures. I was bullish
yesterday on bonds, but sold out with small gains rather than wait for
today. So, bonds rose 1/4 onite. Oh well.
As for systems doing better without stops, you are right. Almost
everything comes back at some point. If you had bought the day before
the stock market crash in 1987, you would have been ahead again in a
couple of years. Though no stops is an extreme example, the point I am
making is that the wider your stops are, the better the system
performance will be, but the greater your risk of ruin is. Bob Pelletier
at CSI has a program that tests systems based on account size, win/loss
ratio, draw downs, etc that is useful in determining what presents you
with good odds over the long run.
One thing is clear to me though. YOU MUST TRADE WITH WHAT YOU ARE
COMFORTABLE WITH. If you cannot trade profitably with tight stops, then
don't! My reason for doing it is that I have a bad habit of cutting
profits short and letting losses ride, so the stops prevent me from the
latter. You seem to be doing something similar by taking counter-trend
trades with clear entry/exit levels. My only question is to you, is why
don't you trade with the trend? This is not meant as a bash, I am just
curious.
Steve
Kevin Morgan wrote:
>
> Subject: Gen: Help understand statment.
>
> Regarding Ray's comments below...
>
> I have the utmost respect for anyone who can successfully employ this
> approach (small losses, large wins, basically). When _I_ try this approach,
> what I find is that I can't do much better than break even! I take
> lots-o-small losses, an occasional moderate win...and I break even.
>
> In my system work, I've found this to really be true: deeper stops are
> better. (!) Way deeper stops. (!!) My best systems have win/lose size ratios
> of as "bad" as $600/$3100 (!!!). Sounds silly I know...but with win
> ratios as high as 98%, it works our pretty well. These are almost
> always counter-trend, limit entry/limit exit (fixed profit) systems,
> with fixed stops (no trailing stops). Some are closer to one to one
> (i.e., $2100/2400 win/lose sizes), so they aren't all so skewed.
>
> I haven't had nearly as much success developing small loss (frequent loss),
> large win systems, and I find them hard to trust anyway, because
> the number of wins is small and they are infrequent...too scary. (Might
> they also have poorer pessimistic profit factors? Have to look at the
> formula again.)
>
> At any rate, my perspective. Again, I'd LOVE to always only take little
> losses, and still make consistent money. I just haven't found a testable
> method to doing so (yet), that makes decent size profits per trade, doesn't
> rely on a few big wings, and (?) has a good PPF.
>
> Every now and then (too often!) I dive back into a discretionary trade,
> I use the "stop should be here because that's where resistance is"
> or "if it goes below that it's not doing what I think/want so get out"
> approach, usually fairly tight...and over all, I break even. But it
> does engage my happy finger; following systems makes me just another
> "rude mechanical" (sorry William).
>
> Anyway, just a little different viewpoint.
>
> -k (the other one)
>
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