March 8, 2010

Less Hightech

“If you trade on a definite trend following loss limiting-method, you can [trade] without taking a great deal of time from your regular business day. Since action is taken only when certain evidence is registered, you can spend a minute or two per [market] in the evening checking up on whether action-taking evidence is apparent, and then in one telephone call in the morning place or change any orders in accord with what is indicated. [Furthermore] a definite method, which at all times includes precise criteria for closing out one’s losing trades promptly, avoids…emotionally unnerving indecision.”
Richard Donchian

“Originally all of our testing was done mechanically with pencil and graph that turned into lotus spreadsheets, which was still used extensively in a lot of our day to day work. With the advent of some of these new modeling systems like system writer, day trader and some of the other things, we’ve been able to model some of our systems on these products. Mostly just to back test what we already knew, that trend following works.”
John Henry

“When designing a system, I believe it’s important to construct a set of rules which fit more like a mitten than like a glove. On the one hand, markets move in trends, but on the other hand, past results are not necessarily indicative of future performance. If you design a set of rules which fit the curve of your test data too perfectly, you run an enormous risk that it will fizzle under different future conditions.”
Barbara Dixon