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Thanks to Michael Paauwe for reminding us that we should compare system
results to buy and hold. However, we need to be aware that TS does not
consider a drawdown from an equity peak as long as the trade is still
profitable. This can give us a misleading picture of the risk. From
Michael's stats:
Buy & Hold $SPX-Daily 03/31/97 - 12/31/97 Rolls quarterly for
comparison
Total net profit $ 108790.00
Max intraday drawdown $ -36245.00
Well, if you had decided to start trading this buy and hold system in
early October of 1997 and held through the crash, you would have had to
suffer through a nearly 130 point ($65,000) drawdown... nearly twice
that reported by TS. Something to keep in mind when evaluating the risk
of buy and hold or any other system that holds for long periods of time.
--
Dennis
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