Forum Archive Index - February 2003

[Phaedrus <Phaedrus@techemail.com>]

 Let me give you some statistics on a completely mechanical short-term trading 
system that I have been running on selected Nasdaq stocks for nearly two years 
:-
 147 Trades/23 months
 86 wins
 61 losses
 Hit Rate 58.5%
 72 Longs
 75 Shorts
 Average Win 10.47%
 Average Loss 4.6% 
 Overall average return/trade 4.2%
Note: These figures do NOT include brokerage. The reason I have left this out 
is because at a flat rate of, say, $20 per round trade, trade size is a 
critical factor in determining profitability. For example, with $400 trades, 
brokerage amounts to 5%, and the system loses money. At the other extreme, with 
a trade size of, say, $400,000, brokerage is 0.005%, and can be totally ignored.
 I developed and tested this system by exhaustively backtesting over many 
stocks and many years. Actual results have not been quite as good as the 
backtests, but are nevertheless acceptable. The worst aspect of this system is 
the fact that losses seem to come in runs. At one point I had 8 consecutive 
losing trades. At another, 11 out of 13 trades were losses. It takes a lot of 
faith to persist with any system giving such results. The faith comes from 
backtesting - I knew that drawdowns of this type occur with this system, and I 
knew that overall, it was robust and profitable.
               Phaedrus.

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