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Bash that system!!!

  • #1
  • First Post: Edited 1:12am Nov 25, 2007 12:34am | Edited 1:12am
This thread isn't to bash other people's systems.... So don't be posting:

XYZ System Sucks!

Okay, now that that is out of the way:

What do you look for in a good system? Basically, I have become an expert in finding the weaknesses in systems. In a very short period of time, I can figure out how a system will fail, based on various market conditions.

One thing I look for is a high risk to reward ratio. Basically this allows you to lose a few trades in a row, and still break even after a winner. So during very crappy periods, you don't lose your a$$.

Now, I also look for consistency over YEARS of backtest data. I like at least 5 or 6, but sometimes 3 will do. Basically, if a system is at least breaking even over a few years, it shows me that it can handle a variety of market conditions.

I also look for real world reasons for entries..... not just because "the charts told me so" or "the fibonacci retracement said it would go up" LOL that stuff is voodoo to me. I think that if you can imagine a real world reason for why something happened, then you can make and educated guess on entries.

For example, James16's pin bars show us either a stop hunt has just occured, or an extreme overbought or oversold situation occured, and the market wouldn't take it any more.
  • #2
  • Nov 25, 2007 12:37am Nov 25, 2007 12:37am
There are several systems (I won't name them) that talk about entered after a MA cross occurs on multiple timeframes (monthly, weekly, daily, etc)

What is the problem with this idea?

You are entering AFTER the majority of the move has taken place. You missed the boat! You hop on board after the pips have been made by others, and shouldn't be suprised to be stopped out quickly after you got your signal.
  • #3
  • Nov 25, 2007 12:39am Nov 25, 2007 12:39am
No stop losses.

To each their own. If you are willing to trade a strategy that can wipe out half your account in a single trade, go right ahead.


On that same train of thought.... "cost averaging" systems are just as bad.... can you really predict a reversal, just because you add to a losing position?

The market doesn't care what you are doing..... enter these crazy systems at your own risk.
  • #4
  • Nov 25, 2007 1:31am Nov 25, 2007 1:31am
Quoting tdion
There are several systems (I won't name them) that talk about entered after a MA cross occurs on multiple timeframes (monthly, weekly, daily, etc)

What is the problem with this idea?

You are entering AFTER the majority of the move has taken place. You missed the boat! You hop on board after the pips have been made by others, and shouldn't be suprised to be stopped out quickly after you got your signal.
I'm not a huge MA fan, but isn't the principle that when certain MA's cross it shows the establishment of a new trend- i.e. the new direction the market has taken, however badly it lags, tends to remain the direction the market will continue to go- at least until you can bag a few pips?

I realize that it usually requires a substantial move to cause the averages to cross, and those are precious pips lost in the wait- but some of us are beggars just looking for the crumbs that drop off the big-boys' table.
Is your SL my TP?
  • #5
  • Edited 2:48am Nov 25, 2007 1:38am | Edited 2:48am
LOL now you are getting into a "chicken before the egg" problem....

What I mean is, I don't really believe in trends.... at least in realtime trading. Sure, we can see pennants, head and shoulders, channels, etc in HINDSIGHT..... but those could all be the results of pure randomness.....

So what you are talking about.... a "trend reversal...." is nothing more than a figment of imagination to me. I know that most people here will disagree with this train of thought..... it's obvious that the majority of people trading at FF are lurking on threads like "Cable Analysis," "Auslanco" and "James16," trying to call chart formations as they see them in real time.

I am not into that AT ALL. I believe the majority of all chart formation is caused by fundamental reactions of banks, not by chart TA. So trends, although real to most people, are not somethingI don't acknowledge.

Quoting kenmania
I'm not a huge MA fan, but isn't the principle that when certain MA's cross it shows the establishment of a new trend- i.e. the new direction the market has taken, however badly it lags, tends to remain the direction the market will continue to go- at least until you can bag a few pips?

I realize that it usually requires a substantial move to cause the averages to cross, and those are precious pips lost in the wait- but some of us are beggars just looking for the crumbs that drop off the big-boys' table.
  • #6
  • Nov 25, 2007 1:46am Nov 25, 2007 1:46am
Quote
What I mean is, I don't really believe in trends...
Well now you just burst my bubble. If there's no trend then I have no friends in trading. Just say it ain't so, so I can bring myself to trade another day.
Is your SL my TP?
  • #7
  • Nov 25, 2007 1:49am Nov 25, 2007 1:49am
Dude, if you are identifying long term trends and then scalping, I think that's great. I just try to analyze the risk of any method before I give it a vote of confidence.

By no means am I an expert on everything out there. All I'm saying is, a trend is only as reliable as its last tick.

Quoting kenmania
Well now you just burst my bubble. If there's no trend then I have no friends in trading. Just say it ain't so, so I can bring myself to trade another day.
  • #8
  • Nov 25, 2007 1:52am Nov 25, 2007 1:52am
I might as well post this question here......

What is a pivot point? And I don't want to know how to calculate it.... I want to know, WHAT DOES IT TELL ME?

Thx.
  • #9
  • Nov 25, 2007 1:52am Nov 25, 2007 1:52am
Quote
I am not into that AT ALL. I believe the majority of all chart formation is caused by fundamental reactions of banks, not by chart TA. So trends, although real to most people, are not sometime I don't recognize.
In all seriousness, if banks are just reacting then you have a plausible theory. But I tend to think otherwise, that banks, in combination with governments have a vested interest in controlling the value of their respective currencies to the extent they are able.

And if that's the case, then there's definitely a direction that price is intended to move- and it can't go from point A to point B without the establishment of a trend.
Is your SL my TP?
  • #10
  • Nov 25, 2007 1:55am Nov 25, 2007 1:55am
Interesting..... so if the US wants to make the dollar weak, but Canada wants the dollar strong, then there is a tug of war.....

Otherwise, a country could move the value to a desired level without any corrections..... a straight line from the current price to the desired price....

** You also have stop hunting to consider here..... those stop runs that banks make to knock out SLs and make money..... thus creating noise.....

Quoting kenmania
In all seriousness, if banks are just reacting then you have a plausible theory. But I tend to think otherwise, that banks, in combination with governments have a vested interest in controlling the value of their respective currencies to the extent they are able.

And if that's the case, then there's definitely a direction that price is intended to move- and it can't go from point A to point B without the establishment of a trend.
  • #11
  • Nov 25, 2007 2:02am Nov 25, 2007 2:02am
Quote
then there is a tug of war.....
We hope there's a tug of war, otherwise there would be no volatility...hence as you imply the price would just go straight to where they wanted it. The volatility provides our chance to enter the market- it's just up to us to figure out who will win the tug of war. The winner establishes the ultimate trend.

These are just my theories. I could be wrong. If I can be convinced otherwise and it makes me a better trader then good on ya!
Is your SL my TP?
  • #12
  • Nov 25, 2007 2:05am Nov 25, 2007 2:05am
Quote
thus creating noise.....

Sorry, I wanted to ask if noise weren't factor whether we believe trends are "real" or not? I just thought noise was one of the occupational hazards of trading.
Is your SL my TP?
  • #13
  • Nov 25, 2007 2:13am Nov 25, 2007 2:13am
I mean, for those of us that believe in trends, it is the noise in the chart. To me, it is a fundamental reason for a price movement. In fact, if I knew exactly when a bank ran a stop hunt, it'd be a damn good trading system based on a fundamental reason....

Darkstar and Mike, where are you?

Quoting kenmania
Sorry, I wanted to ask if noise weren't factor whether we believe trends are "real" or not? I just thought noise was one of the occupational hazards of trading.
  • #14
  • Nov 25, 2007 3:03am Nov 25, 2007 3:03am
I use a system which is called the Holy Grail System in forex

I get the kind of precision trades never heard of.

I do not use any indicators of any sort, its pure maths.

I can always share my investor password if anyone has a doubt.

I prefer 1:10 leverage.
  • #15
  • Nov 25, 2007 3:10am Nov 25, 2007 3:10am
A very simple example.

GBPJPY

Platform Northfinance

Trade date Monday, November 26, 2007

Friday close was 223.30

Now if this pair rises and trades at 223.60 then it will also trade at 226.97

This is an unconditional trade.
  • #16
  • Nov 25, 2007 3:30am Nov 25, 2007 3:30am
Maybe you can start your own thread for your system in the journal section? Pertaining to this thread, are you saying that naked trading is a good way to create a system?
  • #17
  • Nov 25, 2007 3:59am Nov 25, 2007 3:59am
Quoting forexlion
I use a system which is called the Holy Grail System in forex

I get the kind of precision trades never heard of.

I do not use any indicators of any sort, its pure maths.

I can always share my investor password if anyone has a doubt.

I prefer 1:10 leverage.
So what prevents you from sharing the math? I guess I'm unclear as to the point of this post. Are you looking for recognition, subscribers, money...what?
  • #18
  • Nov 25, 2007 4:18am Nov 25, 2007 4:18am
Theoretically price will random walk and price will be distributed in the fashion of the binomial distribution at some time in the future. If you add support/resistance (technical or fundamental) or momentum or trend, this distribution will be skewed to one side. It is ultimately up to the trader to decide where this SR lies. Its important to note that this SR has a statistical affect on on a set of trades and is not a true or false existence. This is because the individual SR identified by the trader never exist in isolation in a single trade scenario. It will all ways have other types of SR working with the trade or against it. Hence testing should be able to determine the whether the SR phenomena is a tradable one.
In trading you are only as smart as your dumbest mistake. - Ralph Vince
  • #19
  • Nov 25, 2007 4:35am Nov 25, 2007 4:35am
Care to enlighten us on what you mean by a binomial distribution?

Quoting SliverB
Theoretically price will random walk and price will be distributed in the fashion of the binomial distribution at some time in the future.
This brings up a good point. I trade on a H4 timeframe, while bank X trades on D1, and bank Y trades on H1. We are all out of sync with each other, so we trade against each other (IE my fibs don't match the other people, etc)

Anyway, I don't really believe in what I just said, but it is food for thought.
  • #20
  • Nov 25, 2007 4:51am Nov 25, 2007 4:51am
Quoting tdion
This thread isn't to bash other people's systems.... So don't be posting:

XYZ System Sucks!

Okay, now that that is out of the way:

What do you look for in a good system? Basically, I have become an expert in finding the weaknesses in systems. In a very short period of time, I can figure out how a system will fail, based on various market conditions.

One thing I look for is a high risk to reward ratio. Basically this allows you to lose a few trades in a row, and still break even after a winner. So during very crappy periods, you don't lose your a$$.
Hi there,

I think my trading system is great and it is completely mechanical.
My system:

- 20% win ratio
- 8/1 and 17/1 reward to risk ratio
- Volatility below the 1 per month
- Avarage total loss of 700 pips a month

What do you think? Did you see any weakness in my trading system? How much money do you think I make with this trading system?
Trainee at UBS Investment Banking
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