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Hi Julius --

Thanks for your comments. The earlier part of this thread does cover some of the questions you raise.

About my comment that using a trading system changes the market being traded. There is considerable evidence that that is true. In the 1970s and early 1980s, Donchian-style breakout systems were very successful for trading futures and commodities. With the advent of inexpensive computers, historical price data, and spreading of the details of those techniques, they stopped being profitable. Many of the trend-style traders have fallen on hard times. The CTA I worked for found that their (primarily trend-following) systems stopped working. John Henry, a very large trend-follower based in the US who had been wildly successful for many years, now regularly posts the worst record for CTAs. See Futures Magazine, July 2007, page 18 -- Henry has four funds among the five worst records, year-to-date.

Deciding whether any market is in a trend at any particular time depends on the time period over which it is measured. A market that looks choppy when plotted as daily bars may have very reliable trends when plotted as 15 minute bars.

Whatever objective function is being used, most people and organizations are limited by the drawdown they are willing to absorb.

It is well known that the expected drawdown for any position is proportional to the square root of the time it is held. Doubling the average holding period automatically increases the expected drawdown by 40%.

Shorter holding periods result in lower drawdowns.

Many institutions sell their services on the basis of low portfolio turnover and hold for longer periods. (In my opinion, most of those that have good performance is primarily due to the once-in-a-millennium bull market we have seen from 1982 to now.)

As far as using end-of-day data, the more I study, research, and test trading systems, the more I prefer short holding periods -- a few days, perhaps a week. I believe they are less susceptible to failure due to overuse, but only time will tell.

It is interesting to note the rapid rise in the popularity of exchange traded funds that track popular indices, including ETFs that increase the leverage. Some days those ETFs account for over 40% of all trading activity on US stock exchanges, measured as dollar volume.

The counterparty to my trade is probably not one of you -- it is probably an automated trading system designed by one of the large, well-funded trading organizations, equipped with the fastest computers, cleanest data feeds, and smartest system developers money can buy.

Thanks for listening,
Howard
www.quantitativetradingsystems.com

<blockquote data-quote="howardbandy" data-source="post: 196653" data-attributes="member: 9179">Hi Julius --Thanks for your comments.&nbsp; The earlier part of this thread does cover some of the questions you raise.About my comment that using a trading system changes the market being traded.&nbsp; There is considerable evidence that that is true.&nbsp; In the 1970s and early 1980s, Donchian-style breakout systems were very successful for trading futures and commodities.&nbsp; With the advent of inexpensive computers, historical price data, and spreading of the details of those techniques, they stopped being profitable.&nbsp; Many of the trend-style traders have fallen on hard times.&nbsp; The CTA I worked for found that their (primarily trend-following) systems stopped working.&nbsp; John Henry, a very large trend-follower based in the US who had been wildly successful for many years, now regularly posts the worst record for CTAs.&nbsp; See Futures Magazine, July 2007, page 18 -- Henry has four funds among the five worst records, year-to-date.Deciding whether any market is in a trend at any particular time depends on the time period over which it is measured.&nbsp; A market that looks choppy when plotted as daily bars may have very reliable trends when plotted as 15 minute bars.Whatever objective function is being used, most people and organizations are limited by the drawdown they are willing to absorb.It is well known that the expected drawdown for any position is proportional to the square root of the time it is held.&nbsp; Doubling the average holding period automatically increases the expected drawdown by 40%.Shorter holding periods result in lower drawdowns.Many institutions sell their services on the basis of low portfolio turnover and hold for longer periods.&nbsp; (In my opinion, most of those that have good performance is primarily due to the once-in-a-millennium bull market we have seen from 1982 to now.)As far as using end-of-day data, the more I study, research, and test trading systems, the more I prefer short holding periods -- a few days, perhaps a week.&nbsp; I believe they are less susceptible to failure due to overuse, but only time will tell.It is interesting to note the rapid rise in the popularity of exchange traded funds that track popular indices, including ETFs that increase the leverage.&nbsp; Some days those ETFs account for over 40% of all trading activity on US stock exchanges, measured as dollar volume.&nbsp; The counterparty to my trade is probably not one of you -- it is probably an automated trading system designed by one of the large, well-funded trading organizations, equipped with the fastest computers, cleanest data feeds, and smartest system developers money can buy.Thanks for listening,Howard<a href="http://www.quantitativetradingsystems.com" target="_blank">www.quantitativetradingsystems.com</a></blockquote>

[QUOTE="howardbandy, post: 196653, member: 9179"] Hi Julius -- Thanks for your comments. The earlier part of this thread does cover some of the questions you raise. About my comment that using a trading system changes the market being traded. There is considerable evidence that that is true. In the 1970s and early 1980s, Donchian-style breakout systems were very successful for trading futures and commodities. With the advent of inexpensive computers, historical price data, and spreading of the details of those techniques, they stopped being profitable. Many of the trend-style traders have fallen on hard times. The CTA I worked for found that their (primarily trend-following) systems stopped working. John Henry, a very large trend-follower based in the US who had been wildly successful for many years, now regularly posts the worst record for CTAs. See Futures Magazine, July 2007, page 18 -- Henry has four funds among the five worst records, year-to-date. Deciding whether any market is in a trend at any particular time depends on the time period over which it is measured. A market that looks choppy when plotted as daily bars may have very reliable trends when plotted as 15 minute bars. Whatever objective function is being used, most people and organizations are limited by the drawdown they are willing to absorb. It is well known that the expected drawdown for any position is proportional to the square root of the time it is held. Doubling the average holding period automatically increases the expected drawdown by 40%. Shorter holding periods result in lower drawdowns. Many institutions sell their services on the basis of low portfolio turnover and hold for longer periods. (In my opinion, most of those that have good performance is primarily due to the once-in-a-millennium bull market we have seen from 1982 to now.) As far as using end-of-day data, the more I study, research, and test trading systems, the more I prefer short holding periods -- a few days, perhaps a week. I believe they are less susceptible to failure due to overuse, but only time will tell. It is interesting to note the rapid rise in the popularity of exchange traded funds that track popular indices, including ETFs that increase the leverage. Some days those ETFs account for over 40% of all trading activity on US stock exchanges, measured as dollar volume. The counterparty to my trade is probably not one of you -- it is probably an automated trading system designed by one of the large, well-funded trading organizations, equipped with the fastest computers, cleanest data feeds, and smartest system developers money can buy. Thanks for listening, Howard [url]www.quantitativetradingsystems.com[/url] [/QUOTE]

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