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Strategies & Market Trends : Technical Analysis- Indicators & Systems

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To: Clueless who wrote (1365)	6/9/1997 9:50:00 PM
From: David Russell Coburn II	of 3325

Let me first say that I personally don't scan. I have a list of active stocks that I run my system on to find buys. So what you are saying is not really appropriate for me. These stocks and a some that have fallen out of this active list are what I run tests with. If you have thousands of stocks that you keep updated like many then I think what you are saying is appropriate. This is very similar to running tests on stocks that have gone from values of $1.00 to $30.00. Is it fair to include the profits that the test would show for the area between say $1.00 and $5.00. It isn't for me because I would never buy a $1.00 stock. In my opinion there are two types of tests. 1.Compare two systems against each other 2.Roughly quantify what kind of profits you can expect from a system. In the case of #2 above you must be very careful to include only profits and losses that you would actually incur in your type of trading. In your case you would only be buying stocks that fell out of your scan, so it should be included in your test.IMO I'm sure systems do maintain their statistical averages on p/l for the manner in which they are tested. The key is to use them like you test them or test them as you will use them. You must be very careful, it's easy to miss the subtleties, the one which you have found could make a major difference. Another important aspect to the interpretation of the quality of your system is the standard deviation of the profits and losses. You would much rather have a system with 80/100 winners making 20% than you would a system having 20/100 winners making 80%. They both have an average profit of 16%/trade but you are much more likely to get the winners with the first system. Another subtlty Your tagline isn't very appropriate as yours is a very good obsevation. David

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