I have just rounded the one year mark with posting my systems and it has been a strange trip. While backtesting I was astounded at how much money I was going to make only to find reality was a little different story. One person went so far as to say I didn’t have a clue and would crash and burn as I suggested you could expect a 20% monthly return if you compounded your investment and kept going. Well he was right but I was right also. Didn’t get 20% per month but I didn’t crash and burn either realizing a 300% return from June 09 to present. I guess the thing that amazes me is the attitude of many of my subscribers. Many bought in after a big month only to be dissapointed when the next month wasn’t huge. I know draw downs are hard to live with but if you can find a return over 100% per year isn’t that enough?

Anyway, just my two cents.

John -

How do you get 300%? The trading stats say 157%.

As far as actions of subscribers, I am not too surprised. People buy in only after good performance, and of course they expect that recent performance to continue. If it doesn’t, they bail.

What people really need to do is to find a system that they feel has long term good prospects/record, wait for a small drawdown and then buy after the system recovers somewhat from that drawdown (like buying a pullback in the market). VERY tough emotionally to do, though (who wants to buy a system that has done well recently?).

As far as your “isn’t 100% year enough” comment, I’d reply that almost no one can stomach a 70% drawdown, like your system had (one of mine had 40% dd, and that scared away many people). Most people can handle only 5-15% drawdown (and therefore shouldn’t even be involved in alternative investments in the first place), some can handle 15-30%, but very few can handle >30%.

A good rule of thumb I have seen is that your annual returns will equal your max drawdown. So, if you want a 50% annual return, you have to be willing to endure a 50% drawdown. That’s a MAR ratio of 1. Most pros would kill for that, over the long term. By this measure, your system is doing good.

Third paragraph should say:

(who wants to buy a system that has NOT done well recently?).

So true, persons tend to subscribe at the top/high when a system is performing and afraid to subscribe on a pullback of a performing system.


Broadsword, who is pretty adept in this field, has pointed out this fact more than once.

It would be neat, as a master’s or doctoral thesis, to crunch C2 data to see who does best: those who enter at highs, those who enter at lows, those who enter in between, etc.

Exit times would also be important. I suspect most people leave a system at the wrong time, too…