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> Then there are the systems that are never back tested because the
> developer doesn't care what happened in the past, only what is
> about to happen. those systems work also and never have to be
> fitted. Ira
We're quibbling over terminology here, but I don't agree. You
obviously have some kind of "back testing" (study, experience, etc)
to develop confidence in the system, else you are just making random
trades. The learning and practice is analogous to a system backtest.
The only significant difference is whether the "knowledge" of the
system is between your ears or coded into a program.
With a discretionary approach you have to trust that what you did or
learned in the past will continue to work in the future. Which is,
of course, exactly what a system backtest is trying to test.
Conceptually, discretionary traders do exactly the same thing; they
just do it in a less rigorous and less repeatable fashion than a
mechanical system trader. In exchange, they can probably implement
their "system" in a lot more flexible and adaptive manner. Which is
great if they're good at reading the market and determining how to
change the system -- and not so great if they're NOT as good at
reading the market, and not disciplined about following their system,
and if they change the system when they shouldn't.
Gary
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