yeah, what he said, I've been trying to tell these mathmaticians how it goes, but where do even start with someone who doesn't even know the difference between mathmatical induction and inductive reasoning? at anyrate, if you are into inductive reasoning, there are some prettty good gamblers on this site who understand it.
I think science is not always so rigorous. My approach fits this criteria: From Wikipedia: Certainly I let results speak for themselves, and when they contradict my expectations in a significant way, as happened to the OP, I change my expectations, and my approach. Don
maybe so, things change all the time on paper, but once you are trading it live the sure way to destruction is to change when things are not going your way. Almost any system you designed when you were of sound mind and body before you went into a drawdown will eventually get you back at least close to even. Abandoning a system in the depths of drawdown is the surest way I know of to ruin. Let it get you back to even then get flat and think about it. No system is so bad that it can ruin you, if it was, all you would have to do is trade it backwards and you'd be rich. Things are always changing, that is what you are supposed to be testing. Once you trade it live you need to have faith that it will just keep going the way it was going. Once it starts working you need to be suspicious that it will soon quit working. If anybody ever invented a system that always works they would just publish it in the New York Times because they would be so rich and bored they wouldn't care anymore who knows about it.
Maybe so, but that sounds a lot like the people that promote buy and hold as a strategy, who say the market will always come back. I trade because I don't take it for granted that the market will come back soon enough for my taste. So I don't take it for granted with my trading strategies either, but then I trade multiple strategies. For me it isn't so much a matter of stopping a strategy because it has stopped working as much as it is switching to another one because it is better - better performing, simpler to trade, better fit for my overall portfolio, more consistent, etc. This is one area where I am less objective than I would like to be, and I have given up some gains because of this (like you said, one of my strategies came back strong when I was out of it), but I have also avoided some significant losses because of this as well, and that is more important to me.
I have to disagree with this ... at a minimum, a system's edge must overcome the cost of commissions, bid/ask spread and market/stop orders slippage ... a system can lose its edge and bleed money to ruin just because of these factors.
yeah, like I said, almost any system will break even minus the spread and commissions. If you can ever overcome the spread and the commissions then I guess you have what they call "positive expectency."
That sounds a lot like the Monte Carlo fallacy, held at one time even by significant mathematicians of an earlier period: a fair coin that has flipped to heads 10 times in a row is now more likely to hit tails on the next flip. (It turns out, it's a fallacy.) If I were in the OP's position, I would devote a few weeks or even months do doing a significant analysis of what went wrong, whether in the backtesting, the slippage, or whatever. At that point, it may become clear that continuing trading is a waste of time, not to mention money; but the OP needs to make that decision him/her self, and will no doubt learn something in the process.
well, good point, sounds like you thought it through, but if I am betting on a coin flip to eventually come out 50/50 heads to tails, what kind of sense does it make to quit betting when it comes out 70/30 against me?
I think I see your point and you're right, as long as a 50/50 is what you really want -- in the long run, you'll get it. I also think that the OP wanted something better than 50/50, so it's up to him/her to figure out whether he/she made some mistake in backtesting, slippage, etc., in concluding that something that "should have" been profitable in fact is not. That is where the hard work comes in for the OP, if he/she is up to the task.