I have been doing a bit of reading up on nassum taleb and I'm a little puzzled as to how I should be regarding his theory on black swan events..
From what I understand, his contention is that the mere existence of black swan events renders one's positive expectancy system useless (unless of course you have 90% in TB's and 10% in specs -- something like that anyway). He is basically saying that all traders who are adopting similar systems to the ones he is making reference to, are all trading under a false sense of security, as their trading capital will ultimately - on the balance of probability - blow up.
How can this assertion be true if you have had a positive expectancy system for some period of time and you've taken substantial profits along the way?
What about when black swan events occur, say 9/11 for example, and you were short on the dow or whatever else plummeted that day? Surely you would have made a bucket? Is he only making reference Long systems and ignoring short strategies?
How does one factor in black swan events into their overall trading plan / system if the above is infact true?
Is there anyway to backtest black swan events or is this a futile exercise?
Im very interested to hear some of the more experienced traders' view on this.
Tech/a, TH etc, you guys have been trading for some time, have you had the pleasure of trading during a black swan event and if so , can you share your experience?
