Hello,
A friend of mine was recently suggesting to the group where I was part of that the easiest way to pick stocks was to get MetaStock, run its indicators and select a list of stocks based on Discretion. I generally argue against such BS, but did not have the mood to do so and left it off. But the information he sought to convey is that all you needed is MS and a data provider and well, you could well be on the way to riches and glory.
Just yesterday I was discussing with a friend cum client of mine the importance of "Benchmarking". I believe that if a system is not able to generate at the minimum twice the return (after deducting all expenses incurred in regard to trading that system) of the said Benchmark, it may be wiser to be a Buy and Hold (or shall I say Hope) investor since one can spend the same time doing some other profitable work.
Generally when computing returns, people forget the risk they take (leverage) and instead calculate directly the net profit / loss A friend of mine recently showed me a list showing the returns generated by him for his clients. He has over 9 months averaged around 5% per month, net of brokerage & taxes. While on the face of it, its a commendable performance, what one misses is the fact that he uses nearly 5X leverage to achieve such returns. The question that one should then ask is whether the risk is worth the reward. 5x is no small leverage and one bad move can wipe out returns generated over months together.
Cheers
Prashanth
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