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Before I return to my stealth reader mode I owe you some answers to your
very valid questions.
1. To the point, where do you see a flaw in Element?
The profit factor is too low. I don't think anyone will ever
get the results a performance report gives, due to slippage, bad fills,
bad luck, and just plain stupid trading. From experience, I know I
don't want to start trading a system where the report says (on a monthly
basis) less than 50 percent of my trades are profitable.
2. Is Jim trading his system and is it walking forward however you
say it is better than Element?
Jim is trading his system. Like I said in my first email, Jim
is a great system writer but a lousy trader. Actually, he is kind of
funny. When the system puts on a trade he is "nose to the screen" and
way too emotionally involved with each tick. Jim is the finest
technical analyst I have had the pleasure of meeting. When he is in a
trade he gives me all sorts of reasons it won't work - "the Bollinger's
are moving in, the fibs have not met the target, the r-levels are moving
the wrong way, it's Monday, etc.,". Jim has a real problem pulling the
trigger, even with a system as robust as this. He is currently working
on totally automating the system which is difficult because it uses tick
data and you can't trade the ES - you have to trade a specific month.
With TradeStation you can't put two tick charts on the same workspace so
his creation is still in process.
3. Are you trading it? If not why not?
Not yet. Two reasons. I am a stock trader and have been very
successful until March 18, 2003. On that fateful day I got emotionally
involved with AMZN and EBAY on the short side. In my mind those two
overpriced pigs with wings could go no higher. As they rose, I
continued to short. I finally covered but we were well into summer. I
am still holding onto some short positions, just a few bucks ahead of
the margin police, and am waiting for this son of bubble to turn around.
Second reason, like both you and Charles Meyer wrote, "Have you ever
seen something that looked too good to be true"? I watch this darn
system, real time, almost every day, tick by tick, waiting for it to
fall apart and it hasn't. It takes trades I never would have taken and
makes a profit. I would like to see the system backtested in a real
bearish market but with the new TradeStation 7.1 there doesn't seem to
be anywhere to get old data. Like I said, this thing has only been
backtested since August of 2002.
4. If it is better than Element and walks forward, there are a lot of
people I know who would like to make your friend Jim richer by
leasing it.
As for the walk forward, like I said, I watch it daily. Today,
September 22, 2003, it closed a short position from Friday at a profit
target ($930.00) and is short 4 contracts from this morning. I will
admit Jim occasionally tweaks it, usually some obscure technical
epiphany he has at two AM on a Sunday. Yes, it optimized, in my opinion
overly so. But it does work profitably, though not nearly as well, on
the NQ and some stocks, like MSFT and ORCL, where there are enough
trades in the day to get a lot of tick data. I asked Jim if he wants to
lease or sell it, and he seems a little paranoid about it. He doesn't
want to see a firm get a hold of it because "once everybody knows, it
won't work". He was kind enough to share it with me because I helped,
very little, with some of the actual coding. Plus, there were
differences between his machine using TradeStation6 and mine using
TradeStation7.
Last, but not least, I am attaching his results for the way he trades
it. Unlike Element ($20000 and 5 contracts) Jim uses $50000 and carries
up to 12 contracts, one at a time from different signals. I believe the
report shows one loosing week since August of 2002. In my original
email I was trying to come as close as I could to Element's capital and
contract requirements.
Your post was taken as constructive and only showed the thoughts of an
intelligent and concerned trader.
Prosper.
John
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Jim2.xls
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