Sky, I'm curious why volatility caused your system to turn on you. As you know, we're developing an automated system based on a particular strategy that should hold up under any market condition because a) it trades both long and short, and b) I haven't seen any evidence that the setups which would trigger entries and exits are affected by volatility. However, I can see where volatility could possibly result in enough slippage to seriously impact profitability. It seems that if you could pinpoint the relationship between volatility and your strategy you could salvage your system.
Isn't this why the only successful systems traders I have heard of all have 6 or 7 different style systems running at the same time? So that while some are losing, the others can win? IMO, you can't build a system that performs good under trending conditions and also performs well under ranging or volitile conditions - they are polar opposites. Just my .02 - correct me if I am wrong, not an expert on systems
What he said... What he said.... What he said.... Sorry I've got nothing original to add... it's already been said.