The System... Or The Trader?

I must admit that when I first stumbled across this site and found my way to the "trading systems" section, I had a feeling rush through me akin to that cliche turn of the 20th century swashbuckling treasure hunter. You know, the guy that after a big thrilling and death defying adventure, rolls away that big stone door and is immediately blinded by golden light glinting off piles of bounty.

"One of these systems is going to make me consistently profitable!"
I thought to myself.

Days, weeks later and I've yet to find myself consistently profitable on a demo, using any system and/or a combination of systems, but then again I could use stricter money management.

I haven't studied nearly as many systems; or even all of them as thoroughly as many of the members here I am sure. However, today, while making my rounds through another one of the multitudinous, labyrinth, thousand page threads, I began to ask the paramount question of my journey: Is the system profitable of its own function? Or is it the sheer experience of the trader at work behind the scenes, that molds the system to suit his or her purposes. How many of you trade strictly your systems?

If there is an exception for every rule, a break for every trend, how much more so in a market that whipsaws through hard and fast rules at a whim.

So, who really trades by the rule? The exact touch off their EMA, or a pivot point. And who trades by the exception? Is the profitable trader the one who has seen just about every movement, and just as he is about to trade his indicators, knows something isn't right and forgoes clicking that sell button. Only to watch the market go against all of his indicators, exactly where his experience subconsciously told him.

For example; when I set up a configuration for myself in a video game, when I adjust my car seat to my idea of perfection on a track day, it's not simply because the configuration works, or the seat is comfortable. It must also be that I have grown accustomed to these configurations, and am able to perform within them, not simply because of them. For if that was simply the configuration wouldn't a single configuration work for everyone? (Of course, people are of different configurations as well, but elaborating on that would extend the argument beyond the scope of this post I believe. )

Of everything I've read here thus far, and I will continue reading, learning. I think one post sticks out in my mind the most. Paraphrased it is: "What works is the combination of a vague system + experience." And I most definitely believe that now.

As for that treasure, those systems. I still believe that they all do indeed glisten, but it takes a good dusting off and polishing from someone who has experience in detailing-rather than a mere thrill seeker-to make them shine.

I know at this point, many of you are thinking, DUH! Especially those of you who are the pinnacle of experience and profitability on these forums. Yes, this is a reiteration of what some of you believe, or know, but I am also asking, your opinion, what do you believe? If and when and why do you trade the exception and not the rule? And is this flexibility borne simply of experience? The System....Or the Trader?

Thanks for your time and consideration.

To better clarify my question, it could also be summed up as:

"Do you believe a system exists, or could exist that is profitable independent of the trader?" I.E. - Human intelligence.

From my limited experience, any profitable system or method might work for the original trader but is difficult to see somebody take someone else's system and trade it exactly the same way.

You will need to find YOUR method, build YOUR rules around it. Like in your car example.

So in short, my answer is NO....

We are all different, with different backgrounds and psychological limits. In this case, one size does not fit all

If you read "the way of the turtle" by curtis faith, you will be enlightened. The answer to your question is in that book. In case you do not have the time to read through a few hundred pages, let me summarize it for you.

A complete mechanical system is a set of rules that is so clearly defined and covers every aspect of trading that no decision is left to the trader to decide. He believes that if a system is well defined enough, anybody who picks it up can obtain similar results (providing all the rules were followed 100%)

Go search out "the original turtle trading rules" on google and get a copy of that. That is what a complete system is like. So the answer to your question according to one of the most succesful traders is yes.

The things you see on FF are not complete systems. Most of them are not well defined enough. If you had to ask yourself "what should I be doing if xyz happened" and you could not find an answer in the system rules, then it is not complete. If you have an unanswered question you need experience to overcome it. Which is the case for most of the systems posted in FF.

I think you answered your own question!

Purely mechanical strategies do exist but I very much doubt you'll find anyone willing to share one on a public forum, for obvious reasons.

The strategies and systems posted on forums like these (or found for sale around the net or on ebay) are more of a framework to work within, a set of guidelines which give the user a directional bias and a reason to trade, as well as a definition of when a trade is no longer valid/viable, and maybe a target to aim for. They can all be useful as long as the user has mastered the fundamentals of 'trading', without that basic ability they will probably all fail to produce results.

Bottom line, if someone doesn't have the ability to trade then (with the exception of a purely mechanical system) no strategy or system will be a miracle cure, conversely if that person has developed the skill of trading then they'll be profitable regardless of which system they use, including the ones posted here (within reason!).

-

About system or trader: there are some pros and cons of ATS. Look at this and decide what is better for you!
The main advantage is of course from the view of psychology. In this case trader takes no responsibility for the decision. Trading occurs without any stresses. Human factor is excluded completely, robot never can be tired, want to sleep and always in a good mood. If trader executes transactions himself, profitable transactions make euphoria for him, but the next unprofitable frustrates him. It’s typical for beginners. Professional traders keep their emotions and react identically as for profitable, as unprofitable transactions, then trading becomes pleasurable for them.
From the view of algorithm, it’s not necessary for trader to know bases of technical, fundamental analysis. All the calculations are made by the automatic trading system. If trader trades without any trading systems, he has to know technical or fundamental analysis in order to be competent in it. But sometimes his analysis of the market can be wrong that brings to losses.
From the view of signals, all them are identified by robot, even if trader is offline. Trader can’t observe all the signals but the robot can because it works much faster than trader.
From the view of profitability, of course all the automatic trading systems are introduced as more profitable than traders. But we know many traders who are milliners and trade by themselves, but we know about profitability of robots only from its advertisement. So it’s time to analyze the disadvantages of automatic trading systems. The main are:
-Complexity of their creation. Buying it we absolutely don’t know anything about their creation and orientation. And however, if this robot according to its advertisement should make you milliner, why its creators sell it instead of earning money with it by themselves.
-Robots are absolutely helpless at force majeure conditions. If your PC hovers or there are problems with Internet, the work of robot can occur huge losses.
-Robot gives signals which are based on technical analyses not fundamental. But news often change the situation at the market during 30 minutes, especially when account rate is changed.
-Widespread feature is that creators of robots often change robot’s history, where show profitable results of their work. But it’s not often so at practice.
Of course, using of robot makes improving at the trader’s work, such as speed, accuracy, analysis and others. But it’s important to realize, that automatic trading systems aren’t cash machines which always give us money. They are only assistants which help us to make decisions.

http://www.casimages.com/img.php?i=1...4400151417.jpg[/IMG]

http://www.forexfactory.com/%3Ca%20h...4400151417.jpghttp://www.forexfactory.com/<a href=...sanstitre1.jpg[/IMG]http://www.hostingpics.net/viewer.ph...sanstitre1.jpg

Good question. Everybody is different, and I can attempt to answer only from the perspective of my own trading.

I have concrete precepts that I adhere to. For example, I trade only in the direction of the W1/D1/H4 trend. And I take this a step further: I pair the strongest currencies against the weakest, to improve the probability of catching the strongest, cleanest trends. Those rules are non-negotiable, but the discretion enters the picture in exactly as to how I weigh up the factors that determine trend direction, strength and weakness. Having said that, if I studied a great many cases, and sorted them into "valid" vs "invalid", I believe that I can come up with a set of programmable rules that would represent a fair approximation of my thought processes.

Much the same applies to how I time my entries on the M15. The candle/volume patterns and overbought/oversold conditions that I look for are almost entirely mechanical, although I may reject some of these setups based on discretionary factors: upcoming high-impact news, average daily range, session considerations (some pairs tend to be more volatile during different sessions). And also the fact that the most important goal is to space entries as evenly as possible. Initial stoploss is never more than 15 pips + spread, although its actual location depends on nearby S/R levels; the tighter the SL, the higher the RR potential of the trade. I'm currently experimenting with different variations of when to move to breakeven, although I strongly suspect that the best option is not to move the SL at all.

Profit exits are almost completely discretionary: as daily/weekly strength/weakness shifts, I look to bank profit, and rotate the freed-up capital into opportunities in other pairs.

Position sizes are never more than 0.5% per component position; and total exposure must never exceed 10% of equity. Those are hard-and-fast rules.

Psychology is obviously ALL to do with the trader, rather than the system. I have found that keeping losses trivially small, and also growing evidence of a profitable track record across different market conditions, are my best friends in terms of maintaining the necessary discipline.

I'm just starting to code parts of my strategy as an EA. I expect the process will take several weeks, even months; my goal for 2012 is to see how close I can get to full automation. I would not be attempting it, if I didn't believe that the core concepts are sufficiently robust that a mechanical approximation will have a good chance of being long-term profitable. I guess time will tell.

David

Experience, deep experience of how the market moves is absolutely essential in my opinion.

Looks like 'ScalpOrDie'......died! The thread's a couple of years old


If anyone can, you can!

Let's say it takes you a year and it proves successful, what will you do with the finished article? Publish it free, sell it, or keep it a closely guarded secret and not discuss it in detail? I think that's why we never see consistently profitable fully automated systems, we kind of know they exist but we've never actually seen one.

Is Hanover losing the plot? First he responds to a joke thread with a good post but failed to see the joke and now he is responding to a dead thread!

It's bobmorloc fault, s/he dug up the thread to post some images of something, we don't know what the images were because he doesn't seem to have mastered the art of posting yet!

So his response was to those non-images...definitely lost the plot... lol

P.S. Check out our new thread and let me know what you think!

Nice thread! It's good to see some comprehensive and insightful fundamental analysis around here, makes a change from all the technical stuff!

Verb started the quality thread and I will try to continue to contribute. Have a great Sunday!

Oops! My mistake.

A step at a time. Let's attempt to get it up and running first. Not sure what I'll do after that.

@bbakker: Brian, I lost the plot many years ago, just ask my wife!

I think, trading strategies, trading plan, time frame and the most important Human intelligence play vital role in trading profit, System does not has big role in it.