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Gang,
Just to chime in a moment ... I analyze professional commodity traders
(CTAs) for a living and there are a lot of successful mechanical traders
and, unfortunately, not as many succesful discretionary traders. This
doesn't mean that a discretionary method is an "excuse for inadequate
programming" -- far from it - in fact, for anyone who has ever traded any
real money knows, emotions run rampant when you trade and it takes nerves
of steel not to let those emotions interfere with your market analysis.
Few people can do it - but that doesn't mean that no one can do it. Take a
look at Bell Fundamental Futures, IXORCAP (part discretionary), IIU Global
Financial, Denali Asset Management, Kottke Grain, Light Blue Trading,
Friedberg and the list goes on- very succesful programs that together run
hundreds of millions of dollars with established track records. And we
won't even go into the hedge fund world, where there are a lot of
discretionary stock and bond traders who can put up better risk adjusted
numbers than any CTA currently available to the public.
Now let's look at some mechanical traders -- especially those who try to
mimic the discretionary methods of experienced traders -- and two come to
mind: Roy Niederhoffer, who happens to be down about 35% this year, and
Gateway Financial, a European program that attempts to mimic discretionary
bank traders -- which just recently closed its doors in order to reevaluate
its research. Both of these trading programs have demonstrated long
periods of achievement and are very innovative - I'm not trying to rub salt
into any wounds - but they've gotten hit just as bad this year, if not
worse, than many of the discretionary traders they try to mimic. Would you
say their coding is inadequate?
In my opinion, discounting the possibility of successful discretionary
trading is extremely myopic and reveals a lack of knowledge when it comes
to the world of professional alternative investments programs.
Just my two cents.
Mike
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