I agree with you on a few fronts. 10.06% is not particularly impressive. But within the context of a robust strategy, it fits nicely versus a buy and hold investor that suffered a 50% drawdown. You will note it just went through its most difficult period as this bear market rally gained steam the past few months. Given that the rally appears to have run into some headwinds, I might surmise the short side of this strategy may bear some fruit in the next few months... I couldn't agree with you more on the drawdown argument that it is the most important thing to consider. No offense to trend followers, as I use some of that in my work as well, but how a guy like Richard Dennis can basically take $400 to $200 mil, then give a good chunk of it back, well...that's not for me. Drawdowns of 50%+ are just insane. I get that pit in my stomach when one of my strategies hits 10%...
I don't care if you disagree or not. You show that you have no idea of what you are talking about. Less than 200 short term trades in 20 years is NOT a statistically significant sample. You basically have no idea of what statistically significant means. In 20 years you need at least 1000 trades to have a level of significance to even start thinking trading the system. I can show several of systems that test well across many markets, actually across most US futures markets but when you begin to trade them you get excessive drawdown because the test results were not significant. Try a 200 MA combined with some filters and time exits and you get superb returns. Then try to trade it. Before you know you get your drawdown. Ron
And I couldn't care less what you think. I am just thankful there are guys like you to take the other side of my trades. I notice nothing to say on the S&P basket I showed. Oh, my bad...if one isn't a momentum monkey, then they're doing something wrong. Good luck with that, pal.
I saw a few comments on statistical significance. Here's a general rule to determine if a method has any statistical edge: profit factor * SquareRoot(number of trades) > 20 So if a strategy has a PF of 2 after commission and slippage, and there were 100 trades... 2 * 10 = 20 There is merit for further research. Make sure to filter out strategies that win 100% of the time, as this would result in an infinite number. I would love if every strategy had 1000 trades, but many do not. Here's a great example. A long-term strategy has 38 trades. Price is not a factor...just some cash flow data. The strategy wins 91% of the time with only one optimized variable. Do we throw this out because there are only 38 trades in 15 years? Profit factor is > 20. D
The problem is not whether you throw out the startegy. The problem is whether you have what it takes (money and discipline) to follow it IF it continuous performing like that. Even one optimized variable can do the damage IMO. In the past I considered several simple strategies that showed excellent results on paper with just one variable. One of them worked well for only six months. I think long-term performance based on a few trades is an artifact of testing, an illusion that is. Signals for long term positioning are not robust at all and conditions change constantly. If you apply prudent risk and money management, your returns will come close to market returns. This is reasonable assumption but it is also confirmed empirically.
you can backtest 1 million systems and I guarantee you will find a few dozen that look golden. with todays computer power this is trivial. you could even write a book after you found them.
I suppose you never know, but it's worked for the past 9 years with no problems. Battle tested in two major bear markets.