Improving Market Structure - December 12, 2011

[Pascal]

If I understand correctly, you're implying that an extended choppy environment will inevitably drag the robot into a losing territory, yet in the long run, the mix of trends vs chops is such that the robot cannot afford to be left out of a position when the big swings materialize. It strikes me that the most recent trade could have been quite profitable already (rather than criss-cross above and below the entry price) if it were to have taken multiple ATR-size profits off the entry limits (e.g. 73.14->75.00 =~ +2.5%) but that would have required the robot to change its plan (it simply doesn't know the stats associated with that scenario). As you say, statistically there's that big swing chance awaiting that will dwarf all these small losses to chop so sticking to the robot plan, as tested, is the best course of trading action.

Trader D

The IWM Robot's trade record is below.
You can see that after the string of small losses during the summer, we changed the robot settings to avoid trading weak signals. We are up 18.38% since March, while with the new model, we would be up 27.51%. This means that the new model can handle choppy environments.

One last point concerning the current trade: we entered the trade on December 1. However, the IWM Robot had been searching for a long position since the 20DMF issued a buy signal and its entry point of 68.74 was almost hit on 11/28, as the low of the day was 68.91. To me, this means that the current settings are "in tune" with the market.


Pascal