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Dear Gary,
I will not comment of the volatility issue. (I do not have "deep"
understanding of it). But may I suggest you to go back to the period of
times when a major bottoms were made (by major I mean that the price went
bellow 200 day moving average and then come back above it). Run your system
over that data. Would you have the same results (form the point of
"volatility" or gains/losses).
To decrease the trading size is a wonderful idea. Another one is to stop
trade (keep running your system, but without actual execution) until you
will feel that everything is back to "normal". How many times I had wished
I would take an around the world cruse during the loosing months...
Just a suggestion.
Uneducated Alex.
At 11:21 AM 11/12/99 -0700, Gary Fritz wrote:
>I'm not an accomplished analyst. I'm a system trader. And my
>systems have been getting whacked for the past month, mostly due to
>volatility.
>
>It seems to me that the volatility has really increased lately. In
>the S&P there have been 6 15-25 pt swings, in less than an hour, in
>the last 6 days. None of them follow through with any kind of move.
>10-20pt gap opens have become common. The ND is even worse.
>
>This raises hell with a short-term system that holds overnight and
>capitalizes on more sane moves. The market settles down for a day or
>so, lulling my system into complacency so it takes a position, then
>wham! There goes a 20-pt explosion, and I'm hit for another loss.
>
>Can someone comment on this? Do you expect this level of volatility
>to continue (or increase!?) for the near/forseeable future, or is
>this a short-term aberration? My system has never seen anything like
>this in its 3+yr history, encompassing several hundred trades.
>
>I can adjust my system to behave better in the market as it's acted
>for the last several months, but I'm nervous about changing something
>that has worked well for a long time. But if this market is going to
>keep acting like this, I need to change something or I'm going to be
>in deep trouble.
>
>For sure I'm going to have to start taking smaller positions, so at
>least I can go broke more slowly.... :-(
>
>Gary
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