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Dear RealTraders,
It may be interesting to note the characterization of the Aberration system,
which is a long-term trend following system, and the report in the Chicago
Tribune today that Richard Dennis is closing his managed futures program. As
most of you know, Dennis has used, at least in part, trend following systems
since the 1970s. While they can make tremendous profits under the right
conditions, they can be hard to stomach under the wrong conditions -
unfortunately, for Dennis and many managed futures programs, the year 2000
has been a particularly difficult time.
Remember, it is never enough to test a trading system, see a 30% drawdown and
say "well, that's not too bad - I can handle that." Make sure you can handle
that if you're in the drawdown for 6 months to a year, and you're required to
continue to put trades in, day after day, with the result of most trades
being losers. That will happen with EVERY TRADING SYSTEM at some point
(although the drawdown duration will differ) - do you have the stomach to
endure?
Make absolutely sure you can say "yes" before you put a cent into any trading
system and start trading. Just my two cents.
Michael Strupp
Chicago IL
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