Forum Archive Index - September 2002

[Phaedrus <Phaedrus@techemail.com>]

Nick,
      If you do not enjoy trading, that fact alone is sufficient reason not to 
do it. You cannot hope to excel at something you dislike. 

 It seems to me that you have similarly made the decision not to use TA on 
emotional grounds, though you present a superficially rational argument. I 
would like to point out some flaws in your logic. 
 (1) You contrast the results of buying/holding over a long period of time, 
when there was a bull market, with the results of using TA over a short period 
of time in a bear market. Hardly a valid comparison.
 (2) There is one very important comparative figure that you have not given us 
- the percentage by which your Buy/Hold portfolio rose or fell over the 1 year 
TA test period. Did your TA based system give the higher return perhaps? 
 (3) You keep referring to the performance of Warren Buffet, and the 
superiority of his approach. Are you aware that even he has years in which he 
makes a loss? That his annual returns may be lower than the S&P500 Index? That, 
at times, the S&P500 Index has outperformed him 3 years out of 4? My point is 
that a comparison period of a single year is too short, and may well unfairly 
disadvantage one approach or the other.

 Over the year that you were running your trial TA/Trading system, you made a 
gain of 15%. This, over a period when the S$P500 Index FELL by nearly 16%! You 
out-performed the Dow, NZSE40 and AllOrds Indices by very large margins. I 
would call this a spectacular success, especially since you are quite new to 
TA. The technical system you devised shows great promise in my opinion. 

 If you want to interpret this experience as a failure, and an indictment of TA 
in general, that is of course your right. Just be aware that your decision not 
to use TA has been made on subjective rather than objective grounds.

             Regards,
                         Phaedrus.

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