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Yep, Overconfidence with a system is the surest sign that you should either:
1. Cut Back positions
2. Take a holiday
3. Just be prepared for a bumpy ride for the next 3 to 6 months. This is
probably the best thing to do as it maintains consistency.
Having invested and directed the trading in a Mechanical Turtle Method fund
I can tell you 3 is the best in the long run. You just have to put up with
feeling not so good for 9 months of the year and then making it all in 3
months of the year. Its worth it in the long run but as soon as you think
your 50% return is the way of the world the markets are going to stop
trending for a while and take away some of it.
Regards
David Hunt
http://www.adest.com.au
----- Original Message -----
From: Don Roos <roos@xxxxxxxxxxxxxxx>
To: <jvc689@xxxxxxx>
Cc: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Sent: Sunday, May 02, 1999 3:20 AM
Subject: Re: Mechanical Trading Update--April '99
> <<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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