按键盘上方向键 ← 或 → 可快速上下翻页，按键盘上的 Enter 键可回到本书目录页，按键盘上方向键 ↑ 可回到本页顶部！
————未阅读完？加入书签已便下次继续阅读！
back。onside。 If we lose 10 percent； we need to make only 11 percent to be all square。 If we go down 30 percent； we need 43 percent； a rather less probable oute； at 50 percent we need to double just to get back。onside。 If we were ever to allow a drawdown much bigger than that； we would need to shoot the lights。out just to get level。 In other words； we would be eliminated from the game。 In practice it is worth tolerating volatilities。and the acpanying losses。tip to 25 percent for slightly greater profits。 Our stops。are normally taken within the range of 10 percent to 25 percent。 The lower figure applies。to big blue…chip situations。and the higher one to smaller market capitalizations； either stocks。or market indexes。
The next trading rule is。to make sure the size of each investment unit is。proportional to the capital available。 Even using the ranking system and the correct stop…loss； it is。possible to make wildly different amounts。of money for a given amount of risk。 There are essentially。three ways。to work。this。 One is。to have equal…size units。all of the time； or unit position sizing； the second is。to use a martingale； and the third and best one is。to use an anti…martingale。
A martingale strategy is。when a man playing roulette always。bets。on red。 He knows。red will eventually e up。 Further； every time he loses； he doubles。his。investment。 When red es up； he gets。all his。losses。back。plus one。 Unfortunately； if the wheel has。a run against him； he will soon find that he is。betting his。whole wad just for the chance of getting a one…chip win。 It simply is。not worth it； and he risks。getting blown away。
An anti…martingale is。a better system。 It works。in reverse。 The unit size is。increased only if the position is。winning。 The unit is。not actually a constant； but a constant proportion of the capital now available。 If the positions。are losing； the unit size is。reduced accordingly。 In this。way downturns。are survived and uptrends。are more fully exploited。 Figure 10。12 shows that； using identical stock。selection and entry and exit rules； a reasonable return can be transformed into an extraordinary performance with the help of an anti…martingale。
We can bine our analytics。and trading rules。to build a mechanical trading system that a puter expert would identify as。a rules…based expert system。 This。means we can write algorithms。for each part of the system。 There are not that many rules。and they are all simple； but their application leads to a sophisticated answer。 They can all be back…tested； and we can put numbers。on the probability of being right。 We have an edge； and we know what it is。 There is。of course no such thing as。absolute certainty。 It is。more like having a form book。at a horse race。 Heavily backed odds…on favorites。do not always。win； but it is。the way to bet。 For example； the normal seasonal setback in September to make a low in October is。a 70/30 bet。 It did not work。in 2006。 It did not work。in 1986 either。 On that occasion we had to wait until late in 1987 for a setback。that then took。the form of a crash。 You do not have to be in this。business。very long before you will be wrong about something。 Nobody knows。what the future holds。 We can speculate； and be right sometimes。 Our system does。not need us。to forecast the future； but it does。identify probabilities。that we can bet on； and provides。a way of exploiting the winners。and minimizing the losers。 With our system when we are wrong； we can be wrong with confidence。
It pays。off to be in the markets。all the time。 In any given year there are periods of up to six months。when being out maximizes。returns。 This。is。usually between May and October。
In any four…year period there is。likely to be a significant bearish correction phase during which swings。down of between 20 percent and 40 percent are normal。 Moves。of 50 percent are rare； and moves。greater than that are exceptional； epoch…making； and go straight into the annals。of legend。 These drawdowns。do occur； however； and can exceed 80 percent。 They require subsequent 400 percent gains to get back。onside； which always。take many。years。 They are essentially terminating experiences。
Once every ten years。there is a very high probability of a recession； and this。is。at the very end or beginning of the decade。 The ninth year。of a decade is。dangerous； and the first three years。deeply disappointing。
Secular trends。have a high probability of lasting for multiples。of four years； with durations。of sixteen to twenty。being quite normal。 These are periods。when only。active trading can survive （in a secular downtrend）； or alternatively a buy…and…hold strategy。is。really hard to beat。 Even within secular uptrends； when inactive styles。are preferred； there is。still a high probability of a fourth…year correction phase。 This will typically。retrace a significant major fraction of the entire uptrend to date； probably at least 20 percent and possibly as。much as。50 percent。
The odds。of winning are higher if we are long stocks。or markets that are in secular uptrend。 We must be willing to tolerate a certain amount of volatility but not more than 25 percent； or we risk。being eliminated from the game。 We always。use stop…loss。levels； but we do not leave such levels。in the market as。open orders。
***************
220
***************