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tech/a

No not really, just a different philosophical paradigm.

Your paradigm states; to make money, I need to lose money.

My paradigm states; to make money, don't lose money.

 

The volatility of financial markets is still so high relative to other asset classes that if your *risk* is correctly calculated, the issue of time is marginalised. (you old b*****d)

It should pay for dinner.

No.

These do not have a material impact on my results.

Reason one; the win% is so high

Reason two; I do not leverage common stocks.

And as you have illustrated, these are the reasons I do not leverage.

For myself, any or all positions may show a paper loss of up to 99%

If leveraged, and unable to make margin calls..............curtains.

Call your disagreement, and raise it by $60000;

If we use an example of a fixed sum, $100

Our gross risk = 100% or $0.00 (with no risk management applied)

Therefore if you pay $10 per share, you have 10 shares, with unlimited reward (in theory)

I buy the same shares at $5, I have I have 20 shares, or twice the reward potential that you do. By paying less, I have skewed the Reward/Risk ratio in my favour. By doing so, I change the risk profile.

I could also give you a breakdown of why buying a *high* price, without regard to the *value* increases your risk, but that involves a lengthy discussion into finance.

Lastly, if your new *high price* was truely a low risk proposition as you suggest, then aggressive money management techniques would not be required, viz. a stoploss Therefore, as I buy the undervaluation, or low price, have no need of a stoploss, and have a high success rate, low price carries less risk.

Clarification of low price being low value.

You can have a low price, that represents a gross overvaluation, and a high price that represents an undervaluation.

Technical systems do not really distinguish between the two variants.

The results of any methodology have to be measured on actualised profit as open profits/losses are subject to change.

The total profitability of the methodology is measured on all the trades taken.

This is why diversification lowers returns. You are diluting all positions.

TT diversifies by exiting non-productive trades as defined by initial stoploss, and remains in trades that produce. The actualised results generate the return with the timeframe accounted for as an accrural.

This is why TT on last update that I saw of closed trades had returned an actualised 9% compounded per annum. Leverage, when applied results in an actualised return of 9% * 2.5 = 22.5%/annum

 

But to my mind still, that is exactly what it does.

I wouldn't look twice at 9% (well actually I would)

But I most certainly would look closely at 22.5%

Which from my endless use of TT as a methodology you can see to be true.

And thats fine, however, could not the same reasoning be applied in reverse?

If it under performs, then over 8yrs it may come back on line?

Which really begs the question, if you classify failure as exceeding an arbitrary point, consistency would demand the same metric to be applied at the other end, viz. over performance. If you have this inconsistency, then the whole basis of testing is fallacious, and you might as well toss it, unless you can justify outperformance and account for the results.

Of course, human nature being what it is, many will only question and search for weakness when adversity strikes.........if it works, don't fiddle.

This however highlights my previous concerns as to finding a methodology that works in all market conditions.

TT may be vulnerable to market conditions, it may not be. The point is do you know?

Quite possibly.

jog on

d998