I am not a forex trader at present, so it will therefore not come as any surprise that I am not intending to present you with a "system" in this posting. (How many will close this thread at this point, I wonder). I am, however, an experienced and profitable index futures trader who is happy to net his 5-15% return per month, consistently, from around 3-8 high probability, low risk trades only, withdrawing some profit as income, whilst continuing to grow capital. So what the hell am I doing talking about systems on a forex forum?
Well, doing only 3-8 trades per month does give one some additional research and education time and the world of forex does interest me for reasons I wont elaborate on here. I have read dozens of threads, some of them end to end, hundreds of postings, and then recently decided to quietly participate in discussions here and there. My humble view is that successful trading is all about "learning how to learn," and I have been doing quite some learning in recent weeks here at forexfactory.com, which I should add is a brilliant resource for traders and whose founders, administrators, and major contributors deserve all the credit in the world.
The thing that has struck me the most about the postings I have read is that there appears to be an incessant desire to automate everything that looks like it MIGHT be a profitable system just because someone can produce 3 months of profitable demo account results (at best) - "Have you written an EA for that?" "Billy blogs is great with EA's - let's get him him to write one for this system." And then... you know how it goes... the focus becomes on automating an untested system and "getting the EA bugs fixed," and the opportunity to properly develop a potentially profitable trading methodology becomes totally lost.
Result? Learning = 0. Profitability = less than 0. Frustration = off the scale.
Don't get me wrong, I do think there is a time and place for EA's - in fact I recently started to use some very simple ones for things like closing multiple orders on hedge trades (no - I never hedge the same instrument against itself!!!), but at the same time could quite happily continue to trade manually without ever caring for an EA again. And indeed I do have a lot of respect for those who have made the effort to learn how to write complex EA's and assist others who are seeking help with automation. But let's be honest about this - is the majority of EA writing and development going on here assisting well intentioned traders to become better traders, or is it distracting them from developing the competencies and experience required to become a life-long profitable traders? I would argue very strongly that it's not difficult to develop a profitable system for yesterday's data, or that work well for the previous 6 months, but it is significantly more challenging to develop the skills, experience and competencies required to become a life-long profitable trader...
So what's the point of all this rambling from a smart-arse derivatives trader who calls himself quiet, modest and humble? Well I think it comes down to the difference between a trading METHOD and a trading SYSTEM. This, I believe is a topic of massive importance to the process of learning, and therefore to the process of successful trading (though I would argue they are part of the same process), but one which is also difficult to fully elaborate on in a single posting - so hence a whole new thread!
So as briefly as possible (difficult for me) - you all know what a SYSTEM is, right? Well, I define it as the kind of thing most people start talking about when they say - "so, tell me about your system." ie the actual mechanics of and conditions for when you enter and exit a trade. It is also the thing that everyone wants an EA for when they have a feeling that a system might be profitable - oh yeah, and a “good” SYSTEM will also have EA's which cover things like "money management" - eg the robots which people buy on the internet from expert marketeers - strange then how people still manage to blow an account with a good system and a good EA. Utter BS, to put it mildly.
So what's the alternative, and where does profitable trading reside? (ok - call it "holy grail" if you must) The only word I can think of is METHOD... A trading METHOD, as opposed to a system, is an end to end process which encompasses things like research, self-education, documentation, exploration and definition of theories, testing, critical thinking, further development, further testing, further analsysis, good record keeping.. and the list goes on - of course live trading is just one part of the overall METHOD of successful trading. And, therefore not surprisingly,
PROFITABLE TRADING IS JUST THE OUTCOME OF THE TOTAL METHOD - IT IS NOT AN ACTIVITY UNTO ITSELF,
as the incessant desire to EA someone else's system would suggest. As an ex management consultant, I could probably construct some sort of dynamic model to depict what I mean by METHOD, but that would make us all want to puke, and probably describes in a nutshell why I left that world for the joys of trading for a living - of course screwing up massively at various points in the journey to date.
So why I am posting all of this? Well I have no intention of setting up a formal coaching programme and have absolutely no commercial interest in anything associated with the above rantings and ravings but I do think my comments are perhaps relevant (call it advice if you want to), based on the prevalence of EA-ing crappy SYSTEMS that have not been properly tested and which are not part of an overall trading METHOD that I see littered all over this (otherwise brilliant) website.
So by all means, I am in favour of using EA's when you have established consistent profitability, yet continue the process of learning within your method - so the EA, just helps with efficiency, speed of execution, and perhaps accuracy. But for God's sake (anyone's God that is - no I am not religious but I might be a dyslexic, agnostic insomniac who stays awake at night wondering if there really is a DOG), do not rob yourself of the opportunity of develop a truly profitable trading METHOD by falling for the "let's EA it" trap.
... if you are a new trader and have successfully reached the end of this post, then I (humbly) suggest that you are already a significant step ahead of all the folks who exited after reading the first line. And if you wish to disagree with me please do so, because I hope to never stop learning how to become a better trader.
Perhaps this thread will die a slow death, but perhaps it may start a useful discussion on the benefits of a METHOD vs SYSTEM and indeed what a method entails – something which has been probably covered before in this forum, but which I suggest is worthy of ongoing discussion.
One thing I am confident in saying though – the gradual evolution of your comprehensive trading METHOD has significantly more opportunity to embed learning into your trading approach than the adoption of any SYSTEM can ever hope to – and I am quite sure that my “holy grail” only came into being when I learnt how to learn.
Good trading to all.
Well, doing only 3-8 trades per month does give one some additional research and education time and the world of forex does interest me for reasons I wont elaborate on here. I have read dozens of threads, some of them end to end, hundreds of postings, and then recently decided to quietly participate in discussions here and there. My humble view is that successful trading is all about "learning how to learn," and I have been doing quite some learning in recent weeks here at forexfactory.com, which I should add is a brilliant resource for traders and whose founders, administrators, and major contributors deserve all the credit in the world.
The thing that has struck me the most about the postings I have read is that there appears to be an incessant desire to automate everything that looks like it MIGHT be a profitable system just because someone can produce 3 months of profitable demo account results (at best) - "Have you written an EA for that?" "Billy blogs is great with EA's - let's get him him to write one for this system." And then... you know how it goes... the focus becomes on automating an untested system and "getting the EA bugs fixed," and the opportunity to properly develop a potentially profitable trading methodology becomes totally lost.
Result? Learning = 0. Profitability = less than 0. Frustration = off the scale.
Don't get me wrong, I do think there is a time and place for EA's - in fact I recently started to use some very simple ones for things like closing multiple orders on hedge trades (no - I never hedge the same instrument against itself!!!), but at the same time could quite happily continue to trade manually without ever caring for an EA again. And indeed I do have a lot of respect for those who have made the effort to learn how to write complex EA's and assist others who are seeking help with automation. But let's be honest about this - is the majority of EA writing and development going on here assisting well intentioned traders to become better traders, or is it distracting them from developing the competencies and experience required to become a life-long profitable traders? I would argue very strongly that it's not difficult to develop a profitable system for yesterday's data, or that work well for the previous 6 months, but it is significantly more challenging to develop the skills, experience and competencies required to become a life-long profitable trader...
So what's the point of all this rambling from a smart-arse derivatives trader who calls himself quiet, modest and humble? Well I think it comes down to the difference between a trading METHOD and a trading SYSTEM. This, I believe is a topic of massive importance to the process of learning, and therefore to the process of successful trading (though I would argue they are part of the same process), but one which is also difficult to fully elaborate on in a single posting - so hence a whole new thread!
So as briefly as possible (difficult for me) - you all know what a SYSTEM is, right? Well, I define it as the kind of thing most people start talking about when they say - "so, tell me about your system." ie the actual mechanics of and conditions for when you enter and exit a trade. It is also the thing that everyone wants an EA for when they have a feeling that a system might be profitable - oh yeah, and a “good” SYSTEM will also have EA's which cover things like "money management" - eg the robots which people buy on the internet from expert marketeers - strange then how people still manage to blow an account with a good system and a good EA. Utter BS, to put it mildly.
So what's the alternative, and where does profitable trading reside? (ok - call it "holy grail" if you must) The only word I can think of is METHOD... A trading METHOD, as opposed to a system, is an end to end process which encompasses things like research, self-education, documentation, exploration and definition of theories, testing, critical thinking, further development, further testing, further analsysis, good record keeping.. and the list goes on - of course live trading is just one part of the overall METHOD of successful trading. And, therefore not surprisingly,
PROFITABLE TRADING IS JUST THE OUTCOME OF THE TOTAL METHOD - IT IS NOT AN ACTIVITY UNTO ITSELF,
as the incessant desire to EA someone else's system would suggest. As an ex management consultant, I could probably construct some sort of dynamic model to depict what I mean by METHOD, but that would make us all want to puke, and probably describes in a nutshell why I left that world for the joys of trading for a living - of course screwing up massively at various points in the journey to date.
So why I am posting all of this? Well I have no intention of setting up a formal coaching programme and have absolutely no commercial interest in anything associated with the above rantings and ravings but I do think my comments are perhaps relevant (call it advice if you want to), based on the prevalence of EA-ing crappy SYSTEMS that have not been properly tested and which are not part of an overall trading METHOD that I see littered all over this (otherwise brilliant) website.
So by all means, I am in favour of using EA's when you have established consistent profitability, yet continue the process of learning within your method - so the EA, just helps with efficiency, speed of execution, and perhaps accuracy. But for God's sake (anyone's God that is - no I am not religious but I might be a dyslexic, agnostic insomniac who stays awake at night wondering if there really is a DOG), do not rob yourself of the opportunity of develop a truly profitable trading METHOD by falling for the "let's EA it" trap.
... if you are a new trader and have successfully reached the end of this post, then I (humbly) suggest that you are already a significant step ahead of all the folks who exited after reading the first line. And if you wish to disagree with me please do so, because I hope to never stop learning how to become a better trader.
Perhaps this thread will die a slow death, but perhaps it may start a useful discussion on the benefits of a METHOD vs SYSTEM and indeed what a method entails – something which has been probably covered before in this forum, but which I suggest is worthy of ongoing discussion.
One thing I am confident in saying though – the gradual evolution of your comprehensive trading METHOD has significantly more opportunity to embed learning into your trading approach than the adoption of any SYSTEM can ever hope to – and I am quite sure that my “holy grail” only came into being when I learnt how to learn.
Good trading to all.