Правила торговли и инвестирования

Don’t try to guess how far a trend will go. You can’t.

If you don’t have losses, you are not taking risks. If you don’t

risk, you won’t ever win big. Losses aren’t the problem. It’s how you

deal with them. Ignore losses with no plan and they will come back

to haunt you and your account size.

Occam’s razor is “Pluralitas non est ponenda sine neccesitate.”

This underlies all scientific modeling and theory building. A

common interpretation of the principle is that the simplest of two

or more competing theories is preferable.

To make accurate judgments about trend following and better

understand Parker’s words, it helps to break down the statistical

concepts of skew and kurtosis.

The “buy-and-hold” investor has been led to believe (perhaps

by an industry with a powerful conflict of interest) that if he has

tremendous patience and discipline and “stays with it,” he will

make a good long-term return. These investors fully expect that

they will make back most, if not all, of recent losses soon enough.

Making matters worse is that a pure buy-and-hold strategy

during an extended drop in the market makes the recovery back to

breakeven difficult (if not impossible).

They can neither fathom the concept of sunk

costs nor admit that buy-and-hold might not work. So they buy and

hold no matter what happens in the mean time.

Risk management is to

direct and control the possibility of loss. The activities of a risk

manager are to measure risk and to increase and decrease risk by

buying and selling stock. In general, good risk management

combines several elements:

1. Clarifying trading and risk management systems until they can

translate to computer code.

2. Inclusion of diversification and instrument selection into the

back-testing process.

3. Back-testing and stress-testing to determine trading parameter

sensitivity and optimal values.

4. Clear agreement of all parties on expectation of volatility and

return.

5. Maintenance of supportive relationships between investors and

managers.

6. Above all, stick to the system.

7. See #6, above.

Five Questions for a Trading System

Answer the following five questions and you have the core

components of a trend following trading system and you are on your

way to having your edge:

1. How does the system determine what market to buy or sell at

any time?

2. How does the system determine how much of a market to buy

or sell at any time?

3. How does the system determine when you buy or sell a

market?

4. How does the system determine when you get out of a losing

position?

5. How does the system determine when you get out of a winning

position?

--Michael W. Covel