FOREX EXCHANGE

I’m looking at a performance chart of an MIT graduate/ Actuary/ a couple other things, and I recognize his returns have been almost identical to the S&P500. This is typical for an optimized system and everyone including the largest banks in the world use this concept to some degree. You’ll see in the next year that only small investors use these models because they are destined to fail as soon as the market turns. Conventional wisdom tells us the market trends 20% of the time but if you zoom out to the weekly or monthly chart there should be a trend in place at all times and an optimized system will realize that trend by taking more longs during a long trend and more shorts during a short trend. The result is when the trend changes you take losses on the optimized system. Depending when these characters begin their optimizations they will take their losses at different times. People who are optimizing for the market selloff beginning this year are heavy short and when the market recovers they will be heavy losers until they pull the plug. My prediction that firms will wisen up should be hastened by the next market turn. These guys are scrambling to reoptimize their systems or their systems are auto reoptimizing and they are becoming geared more to the short side of things so when the market rolls to the long side they will begin taking losses as the S&P begins to recover and their investors will not stand for it.The recent craze of data mining and optimization is nearly over. As with any industry a proliferation and subsequent wash out period must exist. The fact of the matter still remains in trading that a farmer can trade as well as an MIT graduate and I would venture to guess the farmers would out trade the MIT’rs most of the time. My rational for this presumption is simple. While the fools tell you gold is going to $5000 the common sense farmers will tell you if gold goes to $5000 then my corn goes to $25/bushel and that is not possible. Call it what you will; the school of hard knocks, common sense, conventional wisdom. Schools don’t teach this stuff anymore. Common sense would beg the question; why send your kids to school? If common sense had an ego I would ignore its question, but as long as I’ve known common sense there has been no ego; and you know what, it’s been correct a lot more than a particular new grad program at the institute of technology in Massachusetts.