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Strategies & Market Trends : Technical Analysis- Indicators & Systems
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To: Richard Estes who wrote (814)4/23/1997 1:17:00 AM
From: David Russell Coburn II   of 3325
 
Hi Richard,

How do you feel about the following? This is just made up, not a real test.

System #1 tests on 100 stocks with an average return of 100% over 3 yrs. It spends 80% of the 3 yrs in a trade.

System #2 tests on the same 100 stocks over the same 3 yr period with an average return of 50%. It spends 30% of the 3 yrs in a trade.

Which is the better system? This is pretty obvious to me now but it wasn't that long ago. Why not always take "%profit" and multiply it by "time in trade" to normalize everything. ie:apple to apples not oranges. Oh yea, #2.

Now if System #2 tests on the same 100 stocks over the same 3 yr period with an average return of 50% and 40% of the 3 yrs in a trade, this is where you are talking about WHAT KIND OF TRADER ARE YOU? yes?? Both are equally profitable over time. So which one fits your personality. Do you like to trade alot or not?

I am starting to see that you must be very careful in how you interpret system test results. For example on your previous example of systems tests there were a couple that had huge amounts of profit. But according to the money management scheme this would not actually be realized because each time you would start a new trade in the stock you would not put all of the previous winnings back in. Also I didn't pick it apart but there were probably some there that were less obvious. Probably some were more profitable than the ones at the very top when you took the time in the trade into consideration. Unless you had already done that in your profitability calculations.

I understood the point of your systems post and I know that it was not addressing what I am talking about here. I'm just making some observations that are obvious to you and others but have only become clear to me recently for the sake of others like me.

David
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