What was your first trading system? My first system was a variation of Donchian's moving average system. I used an exponential averaging
method because it was easier to calculate and computational errors tended to disappear over time. It was so new at
the time that it was being passed around by word of mouth as the "expedential system."
Your reference to a first system implies that you eventually changed systems. How did you know when your system needed to be changed? Systems don't need to be changed. The trick is for a trader to develop a system with which he is compatible.
Were you incompatible with your original system? My original system was very simple with hard-and-fast rules that didn't allow for any deviations. I found it
difficult to stay with the system while disregarding my own feelings. I kept jumping on and off—often at just the
wrong time. I thought I knew better than the system. At the time, I didn't really trust that trend-following systems
would work. There is plenty of literature "proving" they don't. Also, it seemed a waste of my intellect and MIT
education to just sit there and not try to figure out the markets. Eventually, as I became more confident of trading
with the trend, and more able to ignore the news, I became more comfortable with the approach. Also, as I continued
to incorporate more "expert trader rules," my system became more compatible with my trading style.
What is your trading style? My style is basically trend following, with some special pattern recognition and money management
algorithms.
Without divulging trade secrets, how have you been able to so spectacularly outperform standard trend-following systems? The key to long-term survival and prosperity has a lot to do with the money management techniques
incorporated into the technical system. There are old traders and there are bold traders, but there are very few old,
bold traders.
