Quote Originally Posted by adam ali View Post
Pascal and Billy,

I would be VERY interested to understand how the trading patterns of 2011 differ statistically from those of 2008. Without any analysis to back this up, my gut feel says the markets were extremely chaotic back then just as they are now. How did the Robots react to price discovery back then and why?
Adam,

This is at the source of the statistical reliability problem. The 20 DMF was in confirmed shorting mode during all of September 2008 and had its first market direction signal change with a cover your short/buy signal on October 10, 2008. The robot did manage the trade well because it was looking for short positions durring all of that time Currently, the 20 DMF is already in unprecedented oversold territory and waiting for a long signal. Under such circumstances, the robot decides independently of the 20 DMF, and based on ST/LT statistics, whether to go long or short. But because the database only has a very few ST/LT combinations similar to today's, this is the exception to the rule that should be applied instead.
We are also in a typical volatility expansion environment that can quickly lead to 5-6% daily intraday moves for IWM. Because the robot is an EOD system and the risk management is based on a rising but lagging ATR% of +/-3% daily volatility, any setup coul actually proved to be a winner EOD but would probably be stopped out many times during the day.
Billy