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Dear Don,
Your comments are well taken.On the other hand everyone's experience
is not the same.For example:
1.In 4/97 to 12/97 my principal system was Master Suite.Profit was
$150,000 but some of the drawdowns were tough to stick through but I
did.
2.Having experienced that in '98 I added Dual Thrust Bonds and
Nasdaq.Master Suite drawdown was even worse without recovery and if it
were not for the addition of Dual Thrust and several other miner
contributors I would never had made an additional $150,000 for the
year.I no longer trade Master Suite but would if it looked like the
timing were right.Had I not expanded sensibly I would have lost 1/2 my
money.
3.'99 will of course have its ups and downs,but my firm belief is that
if you properly capitalize you can withstand most
drawdowns.Diversification works well in most areas of investnent and
it is just a question of asset allocation.
Nothing in commodity land looks like easy street to me.It has been
hard work both reseaching and activating.The intensity of it caused me
to suspend trading 2 times for 1 month each to get my compass right.My
mini discovery has been that the longer term trading systems have a
tendency to longer drawdowns than do the shorter term ones I trade.I
just restarted a longer term one because it is an absent niche in my
portfolio and while it is drawing down the shorter terms are
succeeding for me.At the same time my data show the longer term one I
selected decreased exposure of the shorter term system drawdowns.
Once again I appreciate your comments and will further explore
them.Equity run-ups no longer make me cocky and drawdowns get a little
less devastating the more you go through both.Just like all of the
disclaimers say--You can lose all of your money trading commodities.
Sincerely,
John
------------------ Reply Separator --------------------
Originally From: Don Roos <roos@xxxxxxxxxxxxxxx>
Subject: Re: Mechanical Trading Update--April '99
Date: 05/01/1999 12:20pm
<<Eight more months like this or better and California Here I Come!
But
as always there may be pain in between unless I can keep improving the
mix.>>
John:
There will always be alternations of pain and ecstasy in trading.
Improving the mix of systems will not prevent the severe drawdowns
although may mute them a bit. But just when you feel you should be
adding systems to achieve your goals even faster is when you should be
putting on your seat belt for a rough ride. The most common
prescription for disaster is increasing exposure rather than reducing
it
during the ecstasy phase. Everything may look like easy street now,
but
when the typical 3 mo drawdown occurs, the pain will be magnified if
you
are overexposed. If you reduce your exposure now, your life
expectancy
in trading will be greatly magnified.
This is not a lecture, only the voice of one experienced in this
cycle,
trying to help.
Take care,
Don
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