One of the most common phrases you read/hear in trading forums is 'there's no such thing as a holy grail." The thing is no one has (yet?) attempted to accurately define what a holy grail might be before saying it doesn't exist.
It's a bit like a theist saying "God exists!" and an atheist saying, "god(s) doesn't exist!" when neither one can agree about what exactly they mean by the term. Is it a man with a white beard in the sky? A superior alien? The Divine Creator of Everything? A primary cause? Something unknowable?
So it is with the Holy Grail of trading - is it a system that never ever loses? A system that generates the maximum return possible with the least risk? With the smallest investment? What would a system have to be able to do - for you to say 'yes, at last, the grail has been found'. And then, is this the end of inefficient markets as we know them? What would disqualify a system from being the holy grail and merely render it a 'system worthy of trading, but could be improved'? A 'grail contender' if you will.
Of course a definition won't stop people from saying they have the holy grail or that it can't be obtained, but it could be interesting, maybe even helpful, to know when a system is so perfect that to tamper with it any further would be to kill the golden goose.
History
Probably everyone knows the story of the holy grail comes from English and French Arthurian legends. The grail was the cup that Christ used at the Last Supper and if you could find this holy relic, it would grant you immortality, or something similar. You probably remember that scene from Indiana Jones and the Last Crusade. "He chose poorly."
The knights of the round table searched fruitlessly for the grail, and the one who came closest, (Percival? Galahad?) merely got a glimpse of it before it disappeared. The other knights died or came back to Camelot empty-handed. So, inherent in the idea of a grail is the idea that it can never be obtained. That it will always be just out of reach. That questing for it is fruitless, and possibly perilous. I assume it's the same in trading. A holy grail system is one that is so good, it can never quite exist. However, a 'practical grail' would be one that is as close to this ideal as possible.
Profitability and Performance
In your opinion what would a grail system need to be in contention?
Minimum win rate?
Minimum Sharpe ratio or profit factor?
Maximum drawdown?
Maximum 'value at risk' ?
Minimum expectancy?
Minimum return on investment?
Minimum Compounded Annual Growth Rate? (CAGR)
Minimum or maximum account size?
Minimum wait time between profits?
Minimum number of trading opportunities?
Does it need all of these, a few of these, or something else entirely?
Likelihood
We know for sure that there are trading systems. We know that some of these systems are inherently better than others on any metric you could choose. There are some subjective qualities to what makes a good trading system, but if we assume the purpose of trading is to make profits, some systems will simply be more profitable than others. If we knew all the systems in existence, and understood their expectancies, then we could rank them, and select the best among the best. Would that top system then be the 'holy grail'? Would it be close enough to be a 'practical grail'? In my view the answer to the last must be yes. Therefore the grail likely does exist, or at the very least, the most performant system that can reasonably be devised by man has been created and is being used to trade. This is the system against which any future grail contenders must be compared. What does it look like?
It's a bit like a theist saying "God exists!" and an atheist saying, "god(s) doesn't exist!" when neither one can agree about what exactly they mean by the term. Is it a man with a white beard in the sky? A superior alien? The Divine Creator of Everything? A primary cause? Something unknowable?
So it is with the Holy Grail of trading - is it a system that never ever loses? A system that generates the maximum return possible with the least risk? With the smallest investment? What would a system have to be able to do - for you to say 'yes, at last, the grail has been found'. And then, is this the end of inefficient markets as we know them? What would disqualify a system from being the holy grail and merely render it a 'system worthy of trading, but could be improved'? A 'grail contender' if you will.
Of course a definition won't stop people from saying they have the holy grail or that it can't be obtained, but it could be interesting, maybe even helpful, to know when a system is so perfect that to tamper with it any further would be to kill the golden goose.
History
Probably everyone knows the story of the holy grail comes from English and French Arthurian legends. The grail was the cup that Christ used at the Last Supper and if you could find this holy relic, it would grant you immortality, or something similar. You probably remember that scene from Indiana Jones and the Last Crusade. "He chose poorly."
Attached Image
The knights of the round table searched fruitlessly for the grail, and the one who came closest, (Percival? Galahad?) merely got a glimpse of it before it disappeared. The other knights died or came back to Camelot empty-handed. So, inherent in the idea of a grail is the idea that it can never be obtained. That it will always be just out of reach. That questing for it is fruitless, and possibly perilous. I assume it's the same in trading. A holy grail system is one that is so good, it can never quite exist. However, a 'practical grail' would be one that is as close to this ideal as possible.
Profitability and Performance
In your opinion what would a grail system need to be in contention?
Minimum win rate?
Minimum Sharpe ratio or profit factor?
Maximum drawdown?
Maximum 'value at risk' ?
Minimum expectancy?
Minimum return on investment?
Minimum Compounded Annual Growth Rate? (CAGR)
Minimum or maximum account size?
Minimum wait time between profits?
Minimum number of trading opportunities?
Does it need all of these, a few of these, or something else entirely?
Likelihood
We know for sure that there are trading systems. We know that some of these systems are inherently better than others on any metric you could choose. There are some subjective qualities to what makes a good trading system, but if we assume the purpose of trading is to make profits, some systems will simply be more profitable than others. If we knew all the systems in existence, and understood their expectancies, then we could rank them, and select the best among the best. Would that top system then be the 'holy grail'? Would it be close enough to be a 'practical grail'? In my view the answer to the last must be yes. Therefore the grail likely does exist, or at the very least, the most performant system that can reasonably be devised by man has been created and is being used to trade. This is the system against which any future grail contenders must be compared. What does it look like?