Buy and hold versus Schannep's Dow Theory
An image is worth than thousand words. I have profusely written on this blog about the excellent job Schannep's Dow Theory does at containing losses.
Well, today I won't give stats. Just two charts (created by courtesy of TradeStation ®) which are self-revealing.
The first chart is the Dow Industrials from 1/02/1953 to 09/20/2013. It epitomizes the "buy and hold" philosophy. As you can see the drawdowns are hair curling. Would you have survived (both financially and mentally) such drawdowns in real life?
The second chart is Schannep's Dow Theory during the same time period. You don't need to be a market guru to realize that risk (draw downs) are contained.
I will just give you two pieces of data to highlight the net solidity and outperformance of Schannep's Dow Theory:
a) Largest loss: -10.45% .
b) Deepest drawdown (caused by largest string of 3 consecutive losing trades): -19%
Now it is up to you dear readers to draw your conclusions.
Have a nice weekend
The Dow Theorist