Originally posted by FIREHAWK
....and that reason is......
"Intuition" is akin to getting wet everytime you go out into the rain. After a few good soakings, now you're "intuition" tells you stay indoors. It's a learned response....
Such it is as with trading.......
I think most discretionary traders have internalized trading rules that they have learned through experience/teaching/observations but are just unable to explicitly describe those rules.
Some traders insist they need the squawk box to get a feel for trading mood/activity. This would require advanced computing to simulate, assuming the discretionary trader could describe that inputs they are responding to.
Some traders require Level 2 quotes to read the tape, but cannot exactly describe what they are looking for and how that affects their decision to buy/sell/hold.
Some traders look at several different stocks & indexes simultaneously and make a decision to buy/sell/hold based on some combination of behavior between them (e.g. sector leaders, laggards, etc.)
What these things say to me is that it is very difficult to describe the processes involved in making a decision with the above (and additional) input, not that a mechanical trading system does not work.
If you doubt the ability of a mechanical systems, I can give you numerous examples from the futures industry. [Maybe someone else can comment on stock-based systems- the successful system traders I know trade futures b/c if the system works futures offers better returns. There are numerous public systems profitably tested at <A HREF="http://www.wealth-lab.com" target="_blank">wealth-lab.com</A> and you can ask on the chat board there how they are trading it in real-time. I use modified version of two of these systems myself].
I've already mentioned John Ehlers as an example of systems that have been created many years ago but are still profitable today, with managed brokers who will trade the signals exactly as is signaled by the TradeStation module for you. You can lease the system on a per transaction basis from Ehlers or purchase the Tradestation module yourself. Ehler's has 9 participating brokers, with references and brokerage statements to backup the performance of each system. Ehler's has both intraday and EOD systems.
<A HREF="http://www.trade-system.com/aberration.html" target="_blank">Aberration</A> is a well-known system that was released to the public in 1993. It is very simple based on a simple calculation. It has been profitable ever since it's release without changing any parameters. That is 8 years ago. The link above will show you results from 1980-2000. I don't have results for 1993-2000, but how about <A HREF="http://www.trade-system.com/realtime.shtml" target="_blankj">actual brokerage account statements for 13 months</A>. 13 months only gives you a glimpse and is not conclusively, but I am only offering bits of empirical data so you can make your own conclusion.
The late Bruce Babcock developed many systems and traded strictly based on these systems. He also managed several funds. <A HREF="http://www.rb-trading.com/sysinfo.html" target="_blank">Real-time results</A> of three of this systems can be seen from 1991 to present, averaging 45% per year. There have been good & bad reviews regarding Babcock. I have never purchased any of his systems, but you have to respect the long-term, real-time brokerage statements that are available for verification.
Vlad has been posting live signals of his <A HREF="http://www.spb.addr.com/index.html" target="_blank">intraday system</A> since October 2000 and has been under the scrutiny of misc.invest.futures on Usenet. His EOD system has been issuing live signals since March 2001. His intraday system with 12 months of live signals has made 627 S&P points, or over $31k profit with a single emini contract. That is over 380% annual return with 2x margin and no losing months. He uses a conservative rule for slippage by rounding down to the unfavorable integer. That is at least 0.50 per trade and as much as 1.50. I know the system parameters and have verified them for myself.
I have no affiliation with any of the above, just some obvious examples that come to mind. I offer them as tidbits of empirical data that systems-based approach works.
