DislikedJust a thought--when we take human discretion out of the picture (good discretion I mean) and rigidly follow a system, aren't all systems subject to fail over the long run? Unless a system can adapt to new conditions and markets, which is ultimately really only reasonably possible through a human's intervention, isn't even the best system bound to fail?
If a system produces great results for 20 years, but blows up on year 21, what's the point? I suppose a solution would be to say that the max drawdown be at a certain percentage, say, 40% or something--when it reaches that drawdown, shut it down. But then it would be time to switch systems, and the system-hopper would be at it again. Ultimately, isn't trader psychology the key, regardless of the system? So why this endless search for systems that have backtested well over the last 5 years or something? That really says little about how well it may perform this coming year, right?
Don't mean to get off the topic or anything, but this subject always seems to come up.Ignored
Trading, and the development of systems, needs to be something you enjoy. I don't think enough people get that.
One thing you fail to realize is that systems don't just all of a sudden fail. If you've developed a system and you've been trading it successfully the last two years, and then in year three you make 20% less, and then in year four, you make 20% less than that, then you need to sit up and take notice that the market may be changing for your respective edge.
Hence, why you always need to be looking and working on new systems.
If you don't like that, then you don't develop systems. You trade discretionary with certain rules.
Discretion is fine. It's just another way to trade.
Mr. Trend