Quote from AFJ Garner:
Yes, each entry ,exit and size decision is dictated by rules that have been created before that trade was entered. A good definition of mechanical. But this does not preclude, of course, the changing of rules in between trades. Which certainly seems to be what most CTAs have done periodically over the years. I can understand the reason you do not view markets as changing ÂEwithin the infinite time frame you are considering you may well see different market conditions come and go around and around over the millennia. Good point. Nevertheless, in a more human timeframe (and more particularly within the timeframe of a human working life) it may well âappearÂEthat markets change (on the assumption that one agrees with your viewpoint on the very long term ÂEand no reason not to ÂEwe can hardly foresee what an infinite future might bring). In which case, there is a very good argument to be made that trend following systems need adjustment periodically to keep performance positive. Back testing shows that the Original Turtle Rules went flat to negative in and from the 1990s for instance. And that the addition of a longer term filter would have restored some profitability. Yes, I can create a set of rules which would have traded profitably over the past 50 or 100 years with hindsight but I am not at all sure that such rules would remain profitable over the next 50 or 100 years. You may take a different viewpoint?
I do not have a wide enough view of other trading methods to either comment or to categorise profitable trading in this way. I can of agree that the two âextremesÂEyou point out are indeed sources of profit. But I have my doubts that the matter is either this simple or this black and white. Of course, I admit my ignorance on the point ÂEthe joy of discussion is to learn from others and to listen to their views.
