Reviewing historical data of the final Cheetum Market Indicator, known as the unreleased version 4.0, I quickly put together a bar graph showing the 5-year performance of each trade generated by this simplified, yet complex, amalgam of five indicators.
No two years are alike and 2011 is no different. A complete lack a any long-term trend can be seen by the series of small gain and losses which lead many to believe that the age of a trending markets is over. This statement always holds true until trend-following systems fall out of favor. When that happens, a new trend starts and often wipes out all the losses from a system that was "treading water" for months.
For a trend-following system to be successful, it must keep the losses in check during oscillating, or trendless, periods. When the next long trend occurs, and it will, the better systems will not have to recover from large drawdowns caused by the whipsaw action of the market. This is the difference between the current CMI 3.0 which was down nearly 16% before August and this final version which was easily outperforming the market and version 3.0 before both systems took advantage of the steep market drop in August.
America Did This to Itself (shared)
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