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1. I think that this simply reflects a misconception with regard to FA. Intelligent FA also incorporates timing into both purchase and sales. Also, I think nowadays, FA will also incorporate charts into their thinking. It is more that the chart only forms a variable in the overall analysis rather than the final arbiter.

2. What we are actually discussing are 'drawdowns'. Mechanical systems have drawdowns. Any and all trading methodologies encounter drawdowns. What is important is whether the 'system/strategy' is profitable over time, not whether it experiences drawdowns.

The more interesting variable is investment of available funds. From following this thread, it is fairly clear that mechanical traders are looking to keep close to 100% invested, recycling funds as exits are hit. In this way a return is being earned on total capital.

Clearly in a market wide turndown, for mechanical based systems, 100% exits are required, otherwise you are stuck and the entire system grinds to a halt. Obviously the sooner you exit, the better.

This is contrasted with the FA approach where less than 100% would be invested. You hold dry powder. This reduces returns when markets trend for long periods in one direction as you will not have all funds invested. However, in market dislocations as we have currently, it allows for investment of those funds at attractive pricing.

Further, that 'cash' (held by FA) need not be idle. Numerous Options strategies are available against held positions which generate attractive returns (because of the heavy leverage in Options) and provides an answer to the TA chaps who advocate 100% funds in the market as equity positions.

Various trading strategies are not necessarily better/worse, they are simply different. The difference is to allow for differences in emotional makeup and approach. There is no one size fits all in trading/investment.

jog on

duc