Kristine e is a practical person who simply wants to make money with a mechanical trading system. She decides to invest in a trading system that has a good track record. She follows the signals religiously and makes a little money at first. However, the system begins to lose money and experiences draw-downs close to the level of the historical maximum drawdown. Kristine begins to wonder if the system is valid anymore. She reasons that the markets have changed and questions if the system will not work as well under the new conditions. She feels uneasy about risking any more money on the trading system.

The markets will always change in that there will always be reasons to wonder if the present conditions are similar to the past. For example, the money supply numbers were important in the interest rate markets in the early 1980's because inflation was a large concern. However, as inflation abated the money supply numbers lost importance and hardly affected the interest rate markets in the late 1980's. This change, and a host of others in the market environment, could affect the results and performance of a system. Therefore, anyone using a system will question if the new market environment will produce results as good as the previous one. But many traders do not want to risk their money to find out the results.

Even if the trader feels the changing market environment should not affect the performance of the system, there are other questions which recur. How statistically valid are the results? Are more people using the system, which may tend to reduce the performance? There are all kinds of questions that might arise as to the reliability of the method, and all of them are perfectly reasonable, especially considering the amount of money at stake. Historical results may be excellent, but there is simply no guarantee. that future results will come close to historical, or even be profitable. Therefore, there is tremendous uncertainty in trading a system which you cannot trust. This is all the more reason to find a method you are comfortable with and believe works under many situations.