The "You can't be serious" system

THE "YOU CAN'T BE SERIOUS" SYSTEM

Hi, I am that boring guy who some time ago has tried to start a conversation on systems (algo vs. manual vs. ..) that went nowhere, rightly or wrongly.

By the way, capm is not the anagram of "camp", as someone suggested, but the acronym for Capital Asset Pricing Model. It is totally irrelevant for what we do here (it is more relevant in asset allocation, if you are interested), but it was the first thing that came to mind when I decided for a name to join forums.

Anyway, from that experience I had the chance to talk to a few interesting people and learn a bit about forums and what people look for and want and a bit about what I may like too. I had many suggestions to abandon the idea of forums altogether, as it is not worth the effort.
However, I just like to play around a bit and I have a tendency for doing stupid things. I have also seen that there is a good side from time to time. I was inspired by LauraT's threads for example, (which prompted me to join a forum just to congratulate her) and by the response she has had from many. That showed that there are decent people willing to go through some hard work, understand the concepts and learn.

Unfortunately, most people seem to be wanting a "system" which is easy to follow, with all the necessary indicators, templates, arrows and alerts and, above all, free. In my opinion and experience this is the wrong way to address trading, but it took me a long time to realise it, many years ago. So, I can understand, and who am I to judge anyway?

So, I have decided to try another experiment (I love experiments.) I will try to give people what they want and perhaps some will find what they need (how arrogant of me!) In this thread I will talk about how to go from here:
to here: to here:

To perhaps some more stuff and maybe, eventually, back to a naked chart!
We will do this through the use of a system. For silly reasons, immediately undermining my credibility and showing that I have no marketing acumen, I called the system "you can't be serious" (YCBS)

There are good news and bad news. Good news is that I have developed and used several "systems", so I kind of know what I am talking about (how arrogant! Twice already!) An even better news is that this system will be free!! Yey! One more blow to intellectual property rights!
The bad news is that there are some costs: you have to endure my style, including the long winded explanations, the unnecessary and probably unbearable humour, the apparent lack of seriousness, etc. To ease a bit your pain, I will write the parts that are not directly pertinent to the system in italics. I have to warn you though that you may miss some important messages and you ignore them at your peril.
Also, it's a step-by-step approach, so you may need some patience.

As it is customary, I will put in the space below the indicators and whatever.

Transparency, disclosure, admission, confession (this will certainly back-fire)

Another thing many people in forums seem to be curious of is "why do you do it?" Very healthy scepticism, in my opinion. But I can't really answer it myself. I am not yet sure why I am doing it, especially considering that in general I do not believe in free stuff.
So, perhaps I have a commercial agenda (after all, I make a living from trading and education), or I have an oversized ego, or I am a re-born evangelical Christian who is compelled to do good, or I have made so much money and I feel so guilty that I want to give back to the community, or I just want to experiment. Take your pick.

On the more "gossipy" side (everybody loves gossip, right?) :
a) As a former "City" guy, by definition, I do not have a soul or a conscience. I do not need to be reminded. Also, I know what you think: I may not have been so successful after all if I am spending time in forums rather than in my villa in Ibiza. But perhaps I am spending time in forums while I am in my villa in Ibiza, which would make me even more of a nut case! Your choice.
b) yes, for a living I now do my own trading, do courses, education and coaching. To be open and shoot at my own foot: I did not buy any villa anywhere with the returns from this activity, nor a Ferrari, nor a yacht…yet!
c) the system here and all this thread is free (I must be mad!) and the “brand” (??) "capm" is not linked in any way to my business, something I may regret once I will be famous on Reddit’s Wallstreetbets!
d) if you think that that b) and c) are incompatible, so be it, ignore me, report me to the forum police for a shameful downgrade to the loathed "commercial" side or read me with the caveat I may have an ultimate commercial agenda and I may be after your hard earned money. Again, your choice.

Another thing you should know is that I do not like to take myself, gurus, pundits, conventional wisdom and extremist views very seriously, as you may have guessed, starting from the title of this thread. That does not mean that I consider the system, nor the points I make, as a joke. I have used various versions of this method both in active trading and for educational purposes.

Some basic principles

I know you can't wait for the system revelation, but you should really go through some basic principles before.

I won’t talk about how to build a systematic model or algos. If you want to know more about what I think of these topics and you have a masochistic tendency, you can read my long winded blurb here: https://www.forexfactory.com/thread/...trading-debate?

But I get it: people do not like long posts, or explanations (so last century!) so, I will try to do a very quick, dirty, deeply unsatisfactory and unprofessional summary (so this century!) here:

Dirty and simplistic list part 1:
1) Rules are good, you need rules for many reasons and rules should adhere to some basic, sound principles
2) Rules can be tested and stats can be applied
3) The more mechanical the rules the more reliable stats are
4) Totally mechanical rules could be automated so you may go into algorithmic systems

Flip side, dirty and simplistic list part 2:
5) No fun, no education, no "merit" in using algo. Plus, some rules are too difficult to code
6) Automated systems are usually a short blanket: they may keep your vital organs warm but you will always be uncomfortable.
7) Use more "fun", "merit-based", experience based, educated "filters" to "correct" the sterile automatic rules

BUT!!

Point 7 implies a number of costs:
a) Time: you have to be in front of your charts to make the decisions
b) Time and money: you have to build your knowledge and experience
c) Less diversification:" a)" implies you have to focus on fewer markets. Less diversification equals more risk
d) There is no guarantee you can predict the market better than the automatic rules and it is much more difficult to assess if you actually do.
e) Probably the highest cost of all: our human biases are highly detrimental in taking financial and trading decision, as behavioural finance, prospect theory and the lot have widely demonstrated. Psychological biases can be and usually are our worst enemy.

Each of the points above would deserve a thread on its own, but let's stop here. In this thread we will focus, in a very partial way, on 1) and on 7)

One more point, and another crucial one. Most of the content in these forums are dealing with these issues. If you go through some of the threads here you will find many systems and methods, with all the variants you like. Many people say they work, many say they don't, many change or add rules. That is because we are all different. It is vital to understand what kind of person/trader you are: impulsive, analytical, contrarian, trend follower, break-outer, mean-reverter, disciplined, disorganised, fearful, fearless, etc. There is no such thing as "the winning system" without pairing it with what kind of trader you are.

The "you can’t be serious" system will probably follow the same fate. But in doing so perhaps something will stick to some people, prompt them to look further, or re-consider their options and this may help them. I will do my best to keep this thread as a "system thread" and not to transform it into a course.

The YCBS system

So, we start from a naked chart. Apologies to the more experience traders (no doubt they will have better things to do.) This part is addressed to new, or lost or extremely curious traders.

If you have no clue of what you are looking for or at, you need a plan to help you taking decisions. Someone else here has already cleverly claimed the term "roadmap" (Hi, LauraT!). "Chart Atlas"” is not nearly as catchy, but you have the idea.

We need some rules. Rules should be based on something that makes sense and has been proven to work. All forums are full of such ideas, and I am sure I am not going to say anything that has not been talked, looked, proposed, used somewhere else.

What makes sense and, above all, has been proven to work? It is widely accepted that, for example, trend following fits the bill. Mean reversion may too, break-out from ranges could be another, or various examples of carry trades. Some of you will like some more than others. You have to find something that makes more sense to you, your beliefs, your personality.

In this spirit, I will present the system in steps.
1) An (initially) embarrassingly simple system, as a training boot-camp. It will be based on a sort of trend following idea.
2) Later, I will introduce progressively other simple rules to "fine tune" entries and exits. I will introduce elements of Break-out rules and some basic Price Action rules. Told you: old stuff.
3) Money and risk management is a hugely important aspect and we will talk about that too.
4) After a while, depending on how it goes, I may open a channel (I like Discord) where those who are interested can participate in a more interactive way.
5) We will see how it progresses.

Instructions

The "trend" element will be identified by a highly sophisticated proprietary indicator, worth $2,000 according to a committee composed by my 80 year old aunt Daisy, my dog, 2 gold fish and a lacto bacterium (good for your guts!), but yours for free. Now, where did I hear this before? Please indulge me: I can still remember when at the beginning of my trading adventure I bought for $1,800 a system I later discovered was a Bollinger band break-out. Fair play, I am happy for the vendor.

I will later reveal how this indicator is built. Everybody uses MT4, so I will use MT4 too. I think I have found this indi for MT4 on a forum, or I may have slightly modified it from one. For an extra $1,000 I will tell you how to replicate it into any other platform!

Carefully (remember: it is worth $2,000!!!) download this "magic" indicator cryptically named MAbufferhist into your MT4
I love this indi so much that I use it twice, a bit like the Covid jabs – damn, I should have called it the Covid system! So, place it twice on your charts

Set the parameters to 14 period and “simple” on the first one
Set the parameters to 24 period and “exponential” on the second one.
Note to the gurus/experts, to avoid embarrassment: no, this is not a moving average cross-over system. Note to everyone, the numbers are another not too serious thing of mine, I may talk about them one day.

To make things easier I have even attached a template below, but really, ...come on!

Entry:
For the first days let's just focus on this indicators and:
Buy 2 ticks/pips/points (allow for spread!) above the high of the bar where the 2 histograms both become blue
Sell 2 ticks/pips/points below the low of the bar where the 2 histograms both become red
The most attentive readers will have already detected a small element of Break-out. Well done!

Stop and target:
Let’s try, for now, the easiest option: an always in, stop and revert system, so the stop is where the opposite entry is. We will use other techniques in the near future.
Incidentally, this is an easily code-able system, once you have the “secret histogram” ingredients. But let’s not go into that.

Risk management:
How long do you have? Let’s keep things easy and say that eventually we will risk a fixed fractional per trade. I know it is not “exactly right” on a stop and revert system, but let’s keep it simple for now. Use an emergency stop enough far away from the action if you like. It is irrelevant at this stage AS YOU SHOULD NOT TRY TO TRADE THIS SYSTEM WITH REAL MONEY. THIS IS NOT THE SYSTEM I USE. IT IS JUST ONE STEP ON A STEP-BY STEP APPROACH!

Apply the indicators and play around a bit

indicator:

template:

Let’s see some examples.
In the spirit of transparency, I picked different instruments, at random time frames on the day I was writing this, 3rd of May 2021.
If I had to sell this “system” these are the examples I would chose (a tried and tested trick)







But I am not selling any system, and I am here for ..ahem…entertainment? education? Self-harm? So here are other examples, some OK-ish, some rather bad.



Does it work? For all instruments? for all time frames? We will never know unless we do our tests, but this is another story. Let’s stop here.

I would encourage readers to play around with this on various time frames and various instruments. Remember, this is not the system, it’s stage 1. It is boot-camp. One useful exercise would be to see whether you like these rules or not. What do you like and what are you uncomfortable with? Identifying these aspects may give you indications of what kind of trader you are and what system you may be more comfortable with.

I will leave this to sink for a couple of days and see what comes up from the belly of the forum.
Any questions, please ask.

Hi CAPM,

A most welcome thread! I already like your self-deprecating, satirical tone -- you have certainly caught the zietgeist of FF nowadays with your observation that tweet-length soundbites are order of the day! I do hope you get treated with the respect you deserve but there is an alarming number of nay-sayers around these forums...

Anyway, I will be following with interest!

BTW - CAPM is a fine name - it was either that or APT -- I taught both on my Financial Engineering MSc course back in the day....

Good luck and kind regards,

OD

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Thank you very much, old_dog. It is nice to start with a positive feedback! I really appreciate it.
Ah, reminiscence of the ancient investment world. All different these days....or is it?
I guess I am an old dog too. Let's see if this will be just an old dog's club!
Best

Hi capm
very interesting thread, thank you very much for posting it and lets see how it works
and yes, another dog here, quite old too!!

Bonjour,
I’m an old geezer too
I like your tone, your humor. But there is still a lot (too much?) Of blah blah ... And the MA means ... yeah ... Nothing better than two MAs ?
Why not, we will see

What should be ? You must be able to answer 4 questions:
- When?
- With which pair(s)?
- When to enter (momentum)?
- When to go out?

Answer First Question :
The financial center of London alone concentrates more than 35% of global transactions. the other financial centers are far behind. Even NY, but in second position.
So when is the best? At the London Open and the very next few hours. Personally I am in front of the open Frankfurt. One hour before London open.

Answer the Second Question :
The best is to play the strong against the weak, right? No blah blah, a tool. Hanover's (there are others) “Pair Strength Analyser”. You can also play a basket of a few pairs

Answer the Third Question :
The momentum. Again there are tons of indicators, you use two Mas, I use a (little) repainting indy “SinFractal 7TF” (and sometimes one or two excellent Mladen’s indies)

Answer the Fourth Question :
This is the most difficult question! When to go out? Many strategies are developed here on this forum, but few clearly answer this thorny question. A journalist once asks a famous trader what is his secret, how did he get so rich? "I always went out too early!"
Personally, I leave the management of the output to a money management EA. Either MPTM or MBPM if I play a basket


Conclusion :
Have I become rich? No !
Am I losing money? No. I don't lose anymore
But I'm not winning enough to make the game, the risk, worth it.
Does anyone here make money, I mean really earn? No, I don't know any and I don't believe it.
So for me it's just a game to maintain the neurons, to occupy the rainy days
Good luck friend and sorry for my english
jean-francois

PS Please men, don't ask me Indies. It's not my thread and it's not really a big winning strat

It looks like something I might trade so I'll follow along thanks.

I'm a Sierra Chart guy so I'll drop zips with dlls etc here as long as I stay.

Thank you very much AlienDog.
If it continues like this I should rename the system : the canine system, or the geriatric dog system!
Thank you Kiwi_trader. I like Sierrachart. I used it in the past. I hope you will find this thread interesting. Thanks also for creating a diversification from the dogs’ theme.

Thank you le celte (another dog avatar, my goodness!) Yes, I admit I tend to digress, perhaps it is my way of “maintaining my neurons and occupying the rainy days.” You are not bad at blahblah either.
"Nothing better than 2 MAs"? Well, you do not know it yet, do you? I said it is stage 1.
One thing that I do not understand though is what on earth made you think that your post is relevant here!?
It is very early days, but already I must consider removing or blocking posts that have nothing to do with this thread and confuse everybody. I am not sure if it is possible: forum veterans, help appreciated!

Hi capm.
I want to be part of the experiment.
Because it is free? Because it's easy? Because it is...? Yes, that's why I already feel part of the experiment.
In the beginning I remember that I used something very similar, and ... the market is too efficient to beat it with that, the same was me.
Maybe good entry and exit points, good management, ratios ... I'll continue to see where you take us.

You are right capm.
Sorry.
It's because I'm fed up with all these strategies, which are born every day and ... don't work. No more than the others. Thousands of strat here..
We should start by showing our results ... Not backtest, but demo or real money.
See you. Cheers
jf

Hi capm, been playing around with MAbufferhist, very promising results.

Regards, Baz

Hi, I'm curious, despite being the only cat here (threatening indeed). Hopefully old dogs aren't quick enough

Hello capm

Interesting thread. Will follow along as I am enjoying your witty style.

Best of luck

Hi capm.
I would like to jump onboard but I'm not using MT4. Is there a way to replicate the MAbufferhist in TradingView? I don't have the $1000 on me right now
Many thanks and good luck with the thread.

Hehe ... no worries, we have a house full of cats - we love them! We give 15% of our trading profits to the local cat rescue - they have lots of the poor little souls and their vet's bills are always mounting up....

I just looked at the inputs to the indy and took a couple of minutes to reverse engineer it -- see attached chart with the equivalent MA and MA-of-MA crosses that generate the histogram. I have popped this into my Matlab testing suite that has over a decade of tick data history to have a quick check on the basics of the idea.

Also, for non-MT4 traders, trivial job to port to other platforms. Just 6 lines of EasyLanguage for Tradestation etc.

Kind regards,

OD

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Hallo capm,

May you share the mq4 of the indicator?


Thanks

Great Thread! Step by step training that promises to be one of the few resources on FF (cool that you mentioned LauraT: an awesome trainer) that resonates above the noise.

And your writing style is insane (in an awesome kind of way): I´m hooked.

Many thanks and keep it coming please

All the best