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Trading Systems work for 6-12 mnths then die?

  • Post #1
  • Quote
  • First Post: Jul 21, 2008 2:26am Jul 21, 2008 2:26am
Do you often come across system that work very well and then die suddenly?
I wonder why that is? I know the market characteristics change, etc...but still..still very intersting.
Quoting Squidster
I know the market characteristics change
In a nutshell. People fail to build systems that accept dynamic input for varying market conditions.
Quoting Squidster
Do you often come across system that work very well and then die suddenly?
I wonder why that is? I know the market characteristics change, etc...but still..still very intersting.
Maybe it is because those systems don't have a real edge and they were never meant to work (to be profitable) in the long term, but even when a system will not show consistent profit in the long term, it can still show some profits at some point in time before the sample size (number of trades) gets too big and the lack of a real edge becomes evident.
"I say high, You say low, You say why, and I say I don't know..."
Quoting Squidster
Do you often come across system that work very well and then die suddenly?
I wonder why that is? I know the market characteristics change, etc...but still..still very intersting.
Yes. I think, that when we talk about trading system, we mean the system based on short term graphs, indicators etc. By short term I mean 1-240 min.
Try to build a system based on daily and weekly graphs! Using it will be boring - that's for sure, but I'm strongly conviced it will not die so quickly!
Quoting oneeuro
Yes. I think, that when we talk about trading system, we mean the system based on short term graphs, indicators etc. By short term I mean 1-240 min.
Try to build a system based on daily and weekly graphs! Using it will be boring - that's for sure, but I'm strongly conviced it will not die so quickly!
I will have to disagree there. I don't see how using a longer time frame is going to automatically provide you with a better/easier/more profitable system. If you are not exploiting any inefficiency then you don't have a profitable system, and switching to a longer time frame will make only one difference IMO: a slower death (for your trading system), because you are reducing the trading frequency.
"I say high, You say low, You say why, and I say I don't know..."
i got an example that might explain it better. say your system works on a five min chart. it dies out after six months. pretend there have been a million candles in six months. take that system and put it on a four hour chart. it will take a lot longer than just six months to get past a million candles. so in theory, it will take longer to die out.

another point i want to make is that all systems dont neccesarily die out. it depends on what your system depends on. if you have a basic rnage trading or break out system that deals with only support and resistance levels, the system most likely going to die. support and resistance will always exist. but if your system depends on thirty indicators all lining up at the same second, then it's most likely gonna die fast. these indicators wont always line up because different indicators show different things.
Quoting Squidster
Do you often come across system that work very well and then die suddenly?
I wonder why that is? I know the market characteristics change, etc...but still..still very intersting.
I only use medium to long-term trend following systems. I find that they usually work pretty consistently and if there is ever a (relatively rare) long period (say around a year) where they don't work that a string of very profitable trades are just around the corner. In short it's the norm for them to work. I even posted a few of them on the trading systems section but not one person replied so I doubt I'll post them again. Most retail traders seem to have much shorter time frames I guess. I think this is one of the areas where they tend to go wrong.
Quoting Squidster
Do you often come across system that work very well and then die suddenly?
I wonder why that is? I know the market characteristics change, etc...but still..still very intersting.
so many reasons - business cylcles, technological changes, different players coming in or moving out of the market, fundermental changes.

The markets like a person. at the end of the day it easts, sleeps and shits but thats all you count on. Its personality may change with age or fashion
Time hides Nothing
Quoting CindyXXXX
so many reasons - business cylcles, technological changes, different players coming in or moving out of the market, the markets like a person. at the end of the day it easts, sleeps and shits but thats all you count on. Its personality may change with age or fashion
Actually I'll rephrase that

the markets like person with multimillion split personality disorder

Build your method to take advantage of its predictable nature not its "flavour of the month" - Trade when its eating!
Time hides Nothing
Quoting Squidster
Do you often come across system that work very well and then die suddenly?
I wonder why that is? I know the market characteristics change, etc...but still..still very intersting.
So what is the solution? Anybody's got an idea?
Quoting Davidee
I even posted a few of them on the trading systems section but not one person replied so I doubt I'll post them again. Most retail traders seem to have much shorter time frames I guess. I think this is one of the areas where they tend to go wrong.
It is very hard psychologically to spend a whole year losing slowly and waiting for a gain which you don't know when it will come. And it could happen that the drawdown will become so big after 2 unlucky years that a recovery will seem impossible, even theoretically is around the corner.
Imho an EA should trade very often and short term because only in this way you'll have a number of trades which is big enough to prove that you really have an edge.
I don't think trading systems die. I do believe market cycles play a huge role how a trader reacts to the market.

For example, this has been a terrible week for me. My first really bad week in years (its only Tuesday) because price isn't conforming to my trading style, which is nothing but a simple price reversal strategy.

My trading style hasn't changed, but I do believe market dynamic has. I'm just only getting back on the horse as have made up half of what I loss on Sunday night and yesterday. I do believe market dynamic is back in my favor as I've had five huge straight winners.

My style of trading is effected usually by strong trends with mis-leading pull backs, which is what happen Sunday and Monday. Only now is price is making conformable reversal and continuations off s/r levels. This wasn't the case Sunday/Monday. I was getting pull backs in the middle of major s/r levels, something I haven't seen in a while.
Quoting mahdiquant
So what is the solution? Anybody's got an idea?
Get learning
Time hides Nothing
My trading style hasn't died yet. I don't believe it will; at least in short term.

My trading style is dynamic. You learn this with time and experience. I also think that high frequency trading did effect the movement of the market.
  • Post #15
  • Quote
  • Last Post: Sep 21, 2010 5:49pm Sep 21, 2010 5:49pm
Quoting Sauron
It is very hard psychologically to spend a whole year losing slowly and waiting for a gain which you don't know when it will come. And it could happen that the drawdown will become so big after 2 unlucky years that a recovery will seem impossible, even theoretically is around the corner.
Imho an EA should trade very often and short term because only in this way you'll have a number of trades which is big enough to prove that you really have an edge.
Well not performing well would be a break even year, long-term trend following systems aren't usually much worse than this, but you're right it can be. An average year with long-term trend following might be 30% return, good year 100% return. I'm personally very happy with that.

I guess it could be psychologically very hard, but for me it's not as hard as being glued to 15 minute charts watching the randomness act like an emotional roller coaster - tried that, it failed every time. But each to their own I guess.
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