Forum Archive Index - June 2001

[Phaedrus <Phaedrus@techemail.com>]

 Nick,
       Incredible. You have managed to miss the point totally. Your years of 
heavy involvement with MENSA, analysing and formulating systems must have 
impaired your powers of logic, let alone your common sense.
  The test results were so poor, that I was happy to leave John to reach the 
painfully obvious conclusion - This moving average system is not worth using on 
this stock.
  Now Nick, this does NOT mean that this system will not work on some other 
stock. 
  It does NOT preclude the possibility that some other system could work well 
with GPG. I can assure you, some do.
  At a common sense level, is it not obvious that very few people would have 
the fortitude to persevere with a system which, at times, gave 4 consecutive 
losing trades? I couldn't handle that.
  You state "It is hardly suprising that you are able to find a system that 
beats buy and hold. The fact the shares have consistantly risen in value should 
make it
even easier." Totally wrong. Quite the reverse, in fact. Let me give you a 
simple example. Suppose a certain share was trending up in a very steady, 
regular manner, had done for some time, and continued to do so, such that its 
progress was all but linear. No system in creation could beat buying and 
holding. The better a shares performance, the harder it is to beat buying and 
holding it, the higher the target you must try and surpass. Patently obvious, I 
would have thought. Take another stock that had been in an extended trading 
range for years, going nowhere, just ranging back and forth between say $3 and 
$5. Buying and holding this stock would give a zero return, but most any 
mechanical trading system would give substantial gains with a stock such as 
this. Maybe that is why they are called Trading Ranges.
  You state "...it might be better to put the shares in the bottom draw and go 
and find a new hobby".  No good in my case, I am afraid, Nick. You see, this is 
not just a hobby. I do this for a living. Have done for years. Since holding 
this stock only returns about 9% pa on average, I must either find a better 
system, or find a better stock.
   Your attempted correlation of horserace betting systems and technical 
analysis is not valid. Why? Many reasons - you can't change bets halfway 
through a race for one! Read my post about trends again. Trends are a pivotal 
tenet of technical analysis, as they are of Dow theory. There are no trends in 
horse racing.
   Finally, "the fact remains that past results are not a guarantee of future 
winnings".  You got that one right!

          Phaedrus.


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