There's no such thing as a trading system - discuss!

OK, so I am not one of the more experienced traders here. In fact I have never got past a demo account. But, I have been through many thousands of posts on here and come up with several of my own systems. However, I find that every system I look at only works for a limited time. My demo account was up 41% last week using a breakout strategy that I was very pleased with. For the month as a whole it was up 76% and I was about ready to try a small live account. Backtesting through March revealed a profit of just 4 pips and feb looked worse.

I had an EA written on another system I came up with that, optimised, came up with 780% on a 1 hour time frame over 8 months and far more on smaller time frames and shorter periods of time. The problem that in analysing the results I found that the draw downs were unacceptable. If the graph does not show a steady rise, it is not a working system in my opinion. Any system based on a set figure for take profit and stop loss is also likely to fail.

So, I have learnt an awful lot in the last few months and I am now coming to realise that success is not based on a system but on a combination of methods and a broad market knowlege. Price Action is hugely important, support, resistance, and Fibs can not be ignored. Patterns can be surprisingly reliable, and the news is hugely important and not just built into prior technical analysis.

I am interested in hearing if the more experienced traders here, (most of you!) agree or disagree. Also, if you would like to impart any words of wisdom feel free. They will all be much appreciated.

Out of interest I think I will go live next week with a small amount of money just because I feel it is difficult demo trading to be completely honest with yourself.(:

Thanks a lot and good luck to all

Max

Most "systems" I have seen here and on other forums are based on limited data, limited time frames and limited pairs. To me a good system will provide you with correct and timely information over any timeframe and any pair.

Another place mose systems fail is when the pair becomes trapped in a range. The system has no way of detecting it and will give you entry signals (usually too late).

A good number of these systems will also focus on only 1 timeframe. In my opinion to get the best results from Forex you need to monitor multiple time frames. If you can have an indicator that pulls data from other timeframes and displays it on one screen that makes it even easier.

I trade one system, but it works on any timeframe. It pulls data from 4 other timeframes, sometimes not even standard metatrader time frames. For example, it will pull data from the 15,30,45,60 min time frames when I am watching the 15 min chart. If the market is ranging then my indicators will be stuck in the middle and not at extremes. I will usually only have one losing trade when the pair starts to range. No biggie, I trade with a small stop loss.

Don't get discouraged because the systems you have tried or even tried to develop yourself don't work. The fact that you are smart enough to analyze the system and determine it's level of success sets you apart from many traders.

A few things:

1. On larger TFs I think it's more difficult to test or use systems as on a larger TF you could for example have more or less a single major trend, for example, or just ranging and so on. Thus your system is not exposed to all possible price action patterns sufficiently. You should try lower TFs in my opinion.

2. Like you said, news and S/Rs and so on are all important. They should be part of your system. The systems I use for example have one main rule that's the entry rule - and a lot of secondary rules that are the "no entry" rules. So if you want to use an EA you either need to program all that somehow or realize you can't be THAT lazy and earn money doing nothing and at least be by the computer to place your trades yourself.

3. Sometimes people see the potential of a system as much more than the actual profit that you can make from it consistently. For example, take MAs or other indicators, you open a chart and you see the huge moves you could've captured and you think "Whoa! That's Great! This system Rocks!"
So you decide to use somekind of trailing stop to be able to catch those big moves (that almost all indicators will sooner or later follow and show you when they happen abviously) so you test it and you end up capturing 1 big move partially and end up with triggered SLs at negative or breakeven at best on the other 9 of 10. All because big trend moves are more rare than smaller waves and a trailing stop is useless for them. What if, however, you did not try to capture the move (unless you have VERY good reasons to believe it will be such a big move) ? What if you just took the sign from those indicators that now - locally, for the next 1-2 bars at least it is more likely that the move will persist just a bit. In most cases if you choose and adjust the indicators - you can do that and get well above even win to loss if you limmit your risk to reward from 1:10 (if you try to catch the big move) or your 20 pips trailing stop that ussualy won't even reach BE, if you limmit it to just 1:1 for a small amount of pips (which can be high leveraged so you still make good profit). For me, 1:1 or 1:2 risk to reward with 60%+ win to loss works just fine, and if it went for another 100 pips - well, you can't get them all.
In some cases you could also close part of the trade and let the other run on TS as some people here say they do, also.

4. In the particular case or channel/triangle breakouts (if that's what you talked about) I found them to be rather unreliable.. I don't have a big statistic but that's what I've seen so far and on smaller TFs that I like, while trading the channel/triangle itself seems to work better but again not if you try to get too much out of the move and when you are patient and wait for the right time to enter.

Good luck

About time frame I agree (unless it gets too tight for the spread to have a big effect), about pairs - not at all. I believe liquidity or amount of people and money trading has a big impact. The same systems on pairs other than EU that I checked appear to give worse results from what I've seen (plus on m1 the spread matters and for EU you get probably the best volatility to spread ratio).

I am disappointed this was moved to the rookie section becuase I think it would have provided an interesting discussion amoungst the more experienced traders. Look at the likes of fans of James16, Malcomb14, Jacko and SMJones, these are all non system traders, but there are thousands of systems discussed in the system section here on FF.

Thanks for your answers Magnum and Jurrasic. Magnum, I think you are right, systems should work on most timeframes and longterm on all currencies. They should however perform better on some currencies and timeframes. A system that is currently working on GBPJPY may not work on USDCAD but it also should not fail on this currency. Better to stay out of the market than lose after all. I am interested to know more about your range detector to see how that works. Does it also mean you enter markets later? I guess something similar could be achieved using ATR. If the 15 minute ATR over x periods is similar to the hour ATR over y periods this would point to a ranging market. I think your way may be quicker though.

Jurrasic you also are right in that major trends allow the creation of fantastic EAs. However you never know when the trend will end and so will your system. I have also been trying to incorporate 'no entry' rules, largely dependent on time currently. I have tried the 2 entry idea, closing one out early and letting the other run with a TS, however, whereas you can get big moves you can also lose double when you lose and many of your secondary moves fall back to lower than your original exit.

I would be very interested in some more responses to this poll, but in the rookie section I am not sure we will get them,

Good luck all

Max

What is it that makes you think that, just because I have been kicking these rocks around for a while, I would not find this thread. {I did actually find it in the "New Traders" Forum}
Read Between the lines! A Bar is a Bar no matter what TF the Chart is set to.
The main influence of TF or Pair is...
How Long should I wait for it to hit My Target.

I don't believe this statement to be true but it does carry some merit. I would rather state it this way.

"A system that is currently working on GBPJPY may not "currently" work on USDCAD but attention should be paid as to when it does come into line.
Never a truer word....

...
I seldom respond to Polls in any Section of Any Forum but , i just made it 50/50...

no doubt the liquidity has an impact. The most effective systems I have seen make adjustments based on pair and/or timeframe. For example, the pound yen is treated differently than the aussie yen.

What I like to see is more of a trading environment. All of the adjustments to indicators are made in the background. The user just needs to be able to make decisions based on what they see. Each of the indicators are optimized for pair and time frame. It takes a while to set it up this way, but it takes the guesswork out of it when done properly.

I think the best traders don't have a system. I think indicators will beat you up if you follow rigidly. After a few years of trading, You kind of get an idea of a wound up market, expansion and contraction.
I would rather eyeball the daily and shoot from the hip.
Like the euro right now - not a lot of upside but some divergence in the daily
---in the oscillator at about 24 bars so its on the edge for a good for a long .. I think for a day or two as folks are now starting to gear up for a market change and will start to exit their positions. Lots of buyors so to speak. Also, if you measure the top between diverge, on the upside and subtract out the move.... it hit the target retracement. So....fire away for a day or two and see what happens.
The smaller the time frame, the more all this anaylsis gets murky and the oscillators and ma's and every other type of flippin indicator starts to go bananna's.. as you see stuff all over the place. if I am right, money is made -- if wrong,
well, than Id better add some more cash to the pot. I am certain volitality will take out all stops so don't ask me on that one. I will just look for a retest to the upside and add more positions.

Hopefully you are Rich & Gone before it changes yet again... If so, honery membership to the Vanity Lic. Plate is yours. "EUR-USD" could be a candidate.

Mike I am surprised to see you in the system section, I thought you were a a discretionary trader. I guess you are including s/r PA as a system?

Max

I trade two ways. One is nearly purely mechanical(systematic). The other is discretionary, but systematic. So both ways I consider myself a systematic trader. Terms in trading usually tend to come back to how the trader defines them. So with that said you know where my vote landed


Mike

Yep makes sense, I had not thought of the knife system which i guess is more systematic and less discretionary than PA.

Max

Hi

If you learn money and trade management the money will follow, spend time on learning these concepts.

Dale

With the systematic trader everything is pretty symple. You have your rigid rules in place and you follow them every time. It gets a lot more complicated for the discretionary trader though. There are a lot of ways to view to market in order to make trading desissions. Support/resistance, price action, fibs, eliot waves, indicators, news etc. With all of that and multiple timeframes things could get very confusing and you will either always have a reason to be in the marke or freeze and not be able to pull the trigger. This should be solved by the trader having a set of believes about the market. Once you have an understanding of why/when price moves the way it does you then can formulate a strategy arround those believes and only enter the market when its acting in a familiar way. Your believes may be different then the next guys and you could still be both making money. The key is in understanding that no one has the ultimate answer/strategy, some just have believes that are more in tune with the way the market moves. So there really is no right/wrong when it comes to trading. As long as you are profitable long term and have a good understanding of why your aproach works it does not matter how you make your trading desissions and whether or not someone else would agree/disagree with you. We all have (or at least should) our own belives about the market. The only way to tell if our belives are corect is whether or not those belives can make us profitable long term and not by comparing them with someone else's, no matter how reputable that person is. The problem is that aquiring a set of believes that can make us profitable takes a lot of time, observation, testing and patience.

You couldn't be more wrong.

Another fallacy.

I'd like to see that, some systems will work across different timeframes and markets, but all??

This is an old thread. Those guys don't post here anymore.

Wonder why?