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I have followed this thread on mechanical trading systems and find that
there is one flaw. As the markets change the system remains the same.
Any system that is not flexible, and unable to adapt itself to changing
markets, will create large financial losses in the long run. When I say
flexible, I do not mean interpretive, I mean one that can adjust to
conditions as the occur. I am not talking about a neural net that is also
a blind analysis. Ira
John Cappello wrote:
> Dear David,
>
> I can not say I disagree with you especially with your
> credentials.Number 3 has been and will be what I do.Thanks for the
> reinforcement.
>
> John
>
> ------------------ Reply Separator --------------------
> Originally From: "David Hunt" <adest@xxxxxxxxxx>
> Subject: Re: Mechanical Trading Update--April '99
> Date: 05/02/1999 12:13pm
>
> 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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