George Crapple of Millburn Ridgefield
George Crapple, long time trend follower at Millburn Ridgefield Corporation, paints a clear picture:
“What is a system? A system is really an idea. It’s a trading idea for making buy and sell decisions in interest rate futures or currencies or commodities or stock indexes. What a systematic manager will do is take an idea, turn it into a mathematical formula and back test it against historical data and see if it would have made money with good characteristics…A long term system may hold a position for months and months. For example, when the Euro was introduced and went from 118 to 82, that was actually a perfect example…of [a trend following] move. Who would have thought that was going to happen? Nobody thought that was going to happen, but that was a great move for systematic trade followers. So you test your system against historical data and you look at the P&L; you look at the reliability. There’s no watching the S&P 500 go down 50% over three years. I mean, you hit a stop-out point; you’re gone.”
