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Strategies & Market Trends : P&S and STO Death Blow's -- Ignore unavailable to you. Want to Upgrade?

To: DebtBomb who wrote (12313)	10/26/2002 2:00:14 PM
From: exp	Read Replies (2) \| Respond to of 30712

DALE, Jeff, Justa, Ajtj: FYI: Comment: On all the trading threads there is always a lot of imprecise and perhaps even misguided discussion about the relative and absolute accuracy of market forecasts by various individuals (there was even a thread on SI devoted to "bad" calls by various SI market "gurus"). A few points to remember on this issue: (1) in the final analysis the ONLY thing that matters is the annual percentage return (perhaps adjusted for risk) Example: XXX starts with $100 and is right 100% of the time for 11 months gaining 50% thus far so that account has $150 now; then, one bad call in the last month results in a loss of 40% of total account dropping account value to $90 which yields a NEGATIVE return of 10% for the year. YYY starts with $100, gains about 1% a month on average and ends up with $120 for a total POSITIVE return of 20% for the year. (2) the total annual return is a function of the percentage of profitable calls, average percentage gain (loss) per profitable (unprofitable) call, and the average percentage of the account invested per call. Example: XXX always invests 100% of the account, has 60% of profitable calls, and has a gain of 20% per profitable call and a loss of 25% per unprofitable call. End result: NEGATIVE return for the year. YYY always invests 30% of the account, has 30% of profitable calls, and has a gain of 15% per profitable call and a loss of 5% per unprofitable call. End result: POSITIVE return for the year (to see this assume 3 calls with 15% profits and 7 calls with 5% losses). (3) it is impossible to judge market calls/forecasts without taking into account the intended holding period Example: XXX only shorts at lower highs (like in 2002) and holds until the new lower low. YYY only goes long at a new lower low and holds until the new lower high. End result: XXX has a POSITIVE return for the year but YYY may very well also have a POSITIVE return for the year.