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Bash that system!!!

  • #41
  • Nov 25, 2007 10:54am Nov 25, 2007 10:54am
Backtesting is a joke. I have an ea on backtest that took my trades from 1,000 to 2.5 million in 1 1/2 years. Its called Cybertrader. Try it live and your dead. You can backtest and optimize electronically and get whooped.
show us the live money and call your trades live thats the answer.
As far as fibs, If you can trade using those, good luck. The only fibs worthwhile is alternates of time/distance of wave 2 and wave 4, othewise its just a guess as far as overlaps of time frames being of value.
I am not sure about manual trading outside of daily. You can backtest all you want, but I know for a fact that if you can get up at 3:00 am to catch a move on a consistent basis , your a better person than i>
  • #42
  • Nov 25, 2007 12:32pm Nov 25, 2007 12:32pm
There are a variety of ways to look at a trading system. Every system out there has one primary goal - be consistently profitable. Every trader out there sees this goal as being attained only if a system has certain characteristics. Which things they are looking for depend upon their personality and experience. By experience here i do not mean trading experience. I mean a set of conclusions and beliefs that these traders have arrived at in the trading proses. What new and inexperienced traders are looking for in a system is irrelevant because they actually do not know what to look for. Not that what they are looking for is wrong. It's just that they lack the experience to know why something is right/wrong.

I see in this thread and elsewhere traders put a lot of emphasis on the risk/reward. Having a good risk/reward allows you to have a low %wins and still be profitable. I believe that this traders have arrived at this conclusion after learning that it is extremely hard to have a system that has a high %wins while still maintaining a reasonable risk/reward. Your entries/exits would need to be very accurate and most TA techniques are simply unable to provide such entries/exits. To solve this problem a high risk/reward is chosen where your entries/exits can be less accurate. You could loose more often than you win and still be positive at the end of the year. So which of the 2 is better?

Actually neither one. If you are trading a system based purely on TA more often than not a high R/R is the way to go for the reasons mentioned above. So why would anyone bother looking for a system with a high %wins? Well, because provided that you could find such a system it could give you some advantages that a high R/R system can not. Those advantages become clear as soon as you realize that the 2 systems will use different position sizing. Given the nature of a high R/R system you can only risk (in most cases) 1%-3% on any given trade so that the draw down generated by the multiple losses will not destroy your account. A high %wins system will generally have lower DD provided the R/R is not worse than 1:2. With such a system you can position size yourself more aggressively. There is a well respected trader on this forum that trades as much as 10% of his account on any given trade. Is he an idiot or a newbie? If i told you who he is most of you will say he is neither. The reason he is able to trade 10% his account is because he has a truly high probability method (not based on TA) with a high win%. The position size in this case does not have to be an arbitrary number. You can determine the optimal position size through some fairly complex mathematical calculations. You would do a number MC simulations of a large enough sample of trades and would choose the worst case scenario regarding the DD. Then you choose the PS that would keep the max DD at a level you can live with. By doing that with a high win% system you are able to maximize your returns by by choosing the optimum risk. Usually the position size in this case will be higher than in the case of a high R/R method. Even though you will risk more (sometimes way more) your risk is intelligently selected. Obviously there are no guarantees against a blow up but there are no guarantees in trading.

The above is just 2 ways to look at a system among others. Neither of the 2 is the right or the wrong one. Most systems will use one or the other and sometimes a combination of both. When designing a trading system one needs to understand the nature of the system and choose between the 2. So in concussion it is not a high R/R or win% that determine a system's succes. It is how well they fit with the nature of the system.
Stubbornly persistent
  • #43
  • Nov 25, 2007 6:09pm Nov 25, 2007 6:09pm
Instead of making blanket statements that "backtesting is a joke," how about look at what the backtester is doing when making the reports. Scalping EAs and swing trading EAs without at least M1 data will not be accurate.

Quoting 4XWeezal
Backtesting is a joke. I have an ea on backtest that took my trades from 1,000 to 2.5 million in 1 1/2 years. Its called Cybertrader. Try it live and your dead. You can backtest and optimize electronically and get whooped.
show us the live money and call your trades live thats the answer.
As far as fibs, If you can trade using those, good luck. The only fibs worthwhile is alternates of time/distance of wave 2 and wave 4, othewise its just a guess as far as overlaps of time frames being of value.
I am not sure about manual trading outside of daily. You can backtest all you want, but I know for a fact that if you can get up at 3:00 am to catch a move on a consistent basis , your a better person than i>
  • #44
  • Nov 25, 2007 6:51pm Nov 25, 2007 6:51pm
Quote
Those advantages become clear as soon as you realize that the 2 systems will use different position sizing. Given the nature of a high R/R system you can only risk (in most cases) 1%-3% on any given trade so that the draw down generated by the multiple losses will not destroy your account. A high %wins system will generally have lower DD provided the R/R is not worse than 1:2. With such a system you can position size yourself more aggressively.

here's how I see it : a time will come when this (hight %wins system)'s loses will cluster resulting in a huge drawdown or even a margin call and THEY WILL !
  • #45
  • Nov 25, 2007 6:58pm Nov 25, 2007 6:58pm
Quoting Mina
here's how I see it : a time will come when this (hight %wins system)'s loses will cluster resulting in a huge drawdown or even a margin call and THEY WILL !
Of course that is possible. There are no guarantees that any system will survive. I was not trying to promote such a system but merely compare the two.
Stubbornly persistent
  • #46
  • Nov 25, 2007 7:14pm Nov 25, 2007 7:14pm
Do you have an example of a high probability system based on math?

I guess I wonder..... since every system is prone to risk..... that losing 10 times in a row with a high probability will always be in the cards....

Quoting sergiu
Of course that is possible. There are no guarantees that any system will survive. I was not trying to promote such a system but merely compare the two.
  • #47
  • Nov 26, 2007 12:47am Nov 26, 2007 12:47am
Quoting forexlion
Gold as an example moved 2114 pips approximately on friday and I was able to collect 2110 pips out of this move in a single trade.
Pardon me for saying, but this sounds like unsubstantiated boasting. I still don't see the point of these posts. How is anyone to benefit from this? We all know trading is difficult and using other's people's methods is ridiculous, but saying how great your doing without adding more than that seems to add little.

Correct me if I'm wrong, but weren't you the person who when I contacted about discussing your observations and how you arrived at your indicator(s) or where I could find them, and how similar it was to what I've observed, immediately redirected the conversation to how your earn your money by making indicators and offered nothing more in the way of discussion?

I find the whole fib thing fascinating, but if all your going to do is tell everyone about how great you are at catching trends and not start a journal, or a chat room or even offer insight to what it is you think and instead just keep listing your wins, then what exactly is it you're looking to give to anyone else other than the obvious?
  • #48
  • Nov 26, 2007 1:10am Nov 26, 2007 1:10am
Quoting inflxshn
Pardon me for saying, but this sounds like unsubstantiated boasting. I still don't see the point of these posts. How is anyone to benefit from this? We all know trading is difficult and using other's people's methods is ridiculous, but saying how great your doing without adding more than that seems to add little.

Correct me if I'm wrong, but weren't you the person who when I contacted about discussing your observations and how you arrived at your indicator(s) or where I could find them, and how similar it was to what I've observed, immediately redirected the conversation to how your earn your money by making indicators and offered nothing more in the way of discussion?

I find the whole fib thing fascinating, but if all your going to do is tell everyone about how great you are at catching trends and not start a journal, or a chat room or even offer insight to what it is you think and instead just keep listing your wins, then what exactly is it you're looking to give to anyone else other than the obvious?
hmmm....

maybe we are already great and dont need to show an evidence?

Just a suggestion
Trainee at UBS Investment Banking
  • #49
  • Nov 26, 2007 1:12am Nov 26, 2007 1:12am
No need to hijack the thread boasting about how great you are.....

Quoting th_ngue21
hmmm....

maybe we are already great and dont need to show an evidence?

Just a suggestion
  • #50
  • Edited 1:52am Nov 26, 2007 1:36am | Edited 1:52am
Quoting th_ngue21
hmmm....

maybe we are already great and dont need to show an evidence?

Just a suggestion

If that's a sarcastic comment, I agree. If you're serious then I agree with Tdion.

One can argue that bragging is attempt at evidence of a shallow type. There's a difference between bragging and pride in sharing one's accomplishments.

If there's no need for evidence then why spout off?

The greatest and most incredibly prosperous individuals I've known, and I'm talking yes, the people with their own jet(s), are most frequently the quietest about their accomplishments AND their wealth. And they've always been up for a good discussion about their success, given respect for their schedules. Sure there are exceptions. Otherwise the one's who are the loudest typically have far less to show or offer.

It's called maturity, on all levels.
  • #51
  • Nov 26, 2007 2:28am Nov 26, 2007 2:28am
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$$.

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.
You are spot on. The most crucial part of any system is the risk/reward ratio.
  • #52
  • Nov 26, 2007 4:28am Nov 26, 2007 4:28am
Quoting iandekoker
You are spot on. The most crucial part of any system is the risk/reward ratio.
True

it is not a TA or FA. 90% of a complet system are RM and MM.
Trainee at UBS Investment Banking
  • #53
  • Last Post: Jan 3, 2008 2:28am Jan 3, 2008 2:28am
Generic question to all traders:

What keeps your system from spiraling out of control?
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