How many trades until a system is proven, not just lucky? | Forex Factory

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How many trades until a system is proven, not just lucky?

  • #1
  • First Post: Jan 5, 2014 3:59pm Jan 5, 2014 3:59pm
A system I am using has been profitable 3 months in a row. But I have only traded it 50 times. When do you know okay this system really does work?
  • #2
  • Jan 5, 2014 4:02pm Jan 5, 2014 4:02pm
How many trades were successful?

This post by PipMeUp should help you get an idea of what you should expect the real probability to be:

http://www.forexfactory.com/showthre...52#post6623952

Edit: Also, some R code found here from FXEZ could help.

Ex. If 70% of those 50 trades were winners, the PDF interval with confidence of 0.9 is .59-.80. That means that you would be 90% confident that the system will win somewhere between 59%-80%.

Also, R:R comes into play when calculating the expectancy of the system.
  • #3
  • Jan 5, 2014 4:10pm Jan 5, 2014 4:10pm
Thanks cwn.I will definitely read that thread. I thought I had 50 but im 33 wins out of 47, Average win $134 average loss $146.
  • #4
  • Jan 5, 2014 8:14pm Jan 5, 2014 8:14pm
Only 1 way to find out! Go live with a small account and see how it goes. Then, keep adding to it. Remember that you could go 2 years without losing much money and then suddenly the market changes and you lose it all within a few months. A good system is one that adapts to changing market conditions. You can never be sure that a system will work. At some point, you just have to let go of your fears and take the plunge.
  • #5
  • Jan 5, 2014 8:30pm Jan 5, 2014 8:30pm
10,000 trades over 10 years and 5 different markets. You maybe on to something.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #6
  • Jan 5, 2014 8:51pm Jan 5, 2014 8:51pm
i have to tell myself this is such a pathetic criteria

or are NOT there some traders who are very profitable but have place only 1000 trades in their life? you don't think so?

or someone who bet only once in their life and succeed, isn't that a successful trader? statistically, they are not; actually, they are of coz.

Quoting LasVahGoose
10,000 trades over 10 years and 5 different markets. You maybe on to something.
  • #7
  • Edited 9:49pm Jan 5, 2014 9:31pm | Edited 9:49pm
A system can produce major profit one year and then fail miserably the next year. It doesn't make the system good or bad. Most "systems" fall into one of two categories = trend or range. Therefore the goal of a trader should not be to find a system. It should be to manage their trades in a way that more profit is produced than loss in a consistent manner and in accordance with current and changing market conditions.
  • #8
  • Jan 6, 2014 12:01am Jan 6, 2014 12:01am
For me, it is at least a year before a system is satisfactory. Also, it should have a low drawdown. I usually consider a system safe if it can at least provide 8 profitable months out of 12 at 1:1 risk (in a calendar year)
  • #9
  • Jan 6, 2014 1:21am Jan 6, 2014 1:21am
Quoting 2+2=4ex
A system can produce major profit one year and then fail miserably the next year. It doesn't make the system good or bad. Most "systems" fall into one of two categories = trend or range. Therefore the goal of a trader should not be to find a system. It should be to manage their trades in a way that more profit is produced than loss in a consistent manner and in accordance with current and changing market conditions.
Too true, and I think in most people's cases even with discretionary traders the moment they think they've 'cracked it' is the moment they start running into trouble.

Nice work by the original poster who's found something thats working in the current conditions though
Trade ideas posted daily with a follow up each night. See post #1
  • #10
  • Jan 6, 2014 2:04am Jan 6, 2014 2:04am
Quoting GreyWhale
A system I am using has been profitable 3 months in a row. But I have only traded it 50 times. When do you know okay this system really does work?
The margin of error is proportional to the sample size, i believe there was already a thread talking about this and i responded there so might wanna check out:

http://www.forexfactory.com/showthread.php?t=463112

http://www.forexfactory.com/showthre...53#post7169653

I would recommend atleast 100 trade sample on forward test no matter what, but on backtest i usually analyse my systems with atleast 1 million trade samples.
"There's a sucker born every minute" - P.T. Barnum
  • #11
  • Jan 6, 2014 8:28am Jan 6, 2014 8:28am
Quoting 2+2=4ex
A system can produce major profit one year and then fail miserably the next year. It doesn't make the system good or bad. Most "systems" fall into one of two categories = trend or range. Therefore the goal of a trader should not be to find a system. It should be to manage their trades in a way that more profit is produced than loss in a consistent manner and in accordance with current and changing market conditions.
Pay attention to what 2+2 is saying. Recognizing trading conditions (and implicitly the context where one should use/change strategy) is one our strongest points as humans vs. bots. Also, notice that a smaller sample might be perfectly OK as long as the trades are backed by sound reasons rather than voodoo.

Quoting Proximus
{quote} The margin of error is proportional to the sample size, i believe there was already a thread talking about this and i responded there so might wanna check out: http://www.forexfactory.com/showthread.php?t=463112 http://www.forexfactory.com/showthre...53#post7169653 I would recommend atleast 100 trade sample on forward test no matter what, but on backtest i usually analyse my systems with atleast 1 million trade samples.
"atleast 1 million trade samples" Is that even possible? Typo I suppose. If not, how?
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #12
  • Jan 6, 2014 9:02am Jan 6, 2014 9:02am
great question.
i would like to say my system has results of 1000 trades, but is probably only around 100 trades.
at just more than 50% win rate 1:2 risk to reward but not including spread.
so usually 1.8, 1.9 - 1 reward to risk.

so 50 trades is good but i would say maybe 1000 trades ( random guess ) to be sure.

edit and that is 1000 consecutive trades on one currency pair or whatever you are trading
  • #13
  • Jan 7, 2014 4:11am Jan 7, 2014 4:11am
Members on this thread have tried to give reasonable explanations. As for me why I suggest a time-frame instead of number of trades is due to ever-changing market conditions. Now, if you were to execute 200 trades in a month trying to analyze the viability of your stratagy/system, it is likely that the underlying instruments didnt go through its maximum trading phases (trend, range, spikes, liquidity etc). This is precisely why most EA and live trading samples on myfxbook and other forward testing environments are good only for the first 4-5 months and than a sudden crash . Those with minimal drawdown stratagies are affected as well (i.e. consecutive loses in a row)
  • #14
  • Jan 7, 2014 8:47am Jan 7, 2014 8:47am
Quoting vox dei
{quote} "atleast 1 million trade samples" Is that even possible? Typo I suppose. If not, how?
I meant on backtesting, on forward test of course its impossible, but on backtest its possible.Just get a big database of historical data, and trade on lower timeframes to have enough samples.

If your system works on D1 it should work on M5 too, not identically showing the same results, but since the market is fractal-like, it should be somewhat similar.
"There's a sucker born every minute" - P.T. Barnum
  • #15
  • Jan 7, 2014 11:51pm Jan 7, 2014 11:51pm
Quoting Proximus
If your system works on D1 it should work on M5 too, not identically showing the same results, but since the market is fractal-like, it should be somewhat similar.
lol

Where did you get this shit?

Surely there're systems that work on both but lots are specifically for LTF or HTF. And there may be many different reasons for that. If you're so ignorant that didn't know - I'm sorry you're too much of a newish newbie to give advice here.

Read babypips at least! Maybe after that you'll get that your understanding of markets is very poor yet...

Don't mislead people.

I just laugh at guys like you but some will actually buy the crap you put here - then we'll see muppets [like maggie] who were taught by other muppets [like turvey] and then themselves gave birth to another generation of muppets [maggie used to do coaching]. That all looks pretty funny for me, though, of no good for those who come here to actually get to know FX...
The single most important factor is having control of your own life.
  • #16
  • Jan 7, 2014 11:59pm Jan 7, 2014 11:59pm
Quoting LasVahGoose
10,000 trades over 10 years and 5 different markets. You maybe on to something.
And you may as well be onto nothing with that.

Have you seen turvy?
The single most important factor is having control of your own life.
  • #17
  • Jan 8, 2014 12:24am Jan 8, 2014 12:24am
Quoting Mikkk01
{quote} lol Where did you get this shit? Surely there're systems that work on both but lots are specifically for LTF or HTF. And there may be many different reasons for that. If you're so ignorant that didn't know - I'm sorry you're too much of a newish newbie to give advice here. Read babypips at least! Maybe after that you'll get that your understanding of markets is very poor yet... Don't mislead people. I just laugh at guys like you but some will actually buy the crap you put here - then we'll see muppets [like maggie] who were taught by other...
A system should scale to any TF. Inputs may require adjustments. 50 pip stop on hourly chart is not going to work for 5 min chart. Ideally stop locations should not be defined by fixed amount of pips, but for the sake of simplicity traders assume that 50 covers sufficient number of breakdowns to indicate on hourly chart in the majority of situations that one is wrong. On 5 min chart the same decision should in the majority of situations require fewer pips, but the system stays the same.
  • #18
  • Jan 8, 2014 12:32am Jan 8, 2014 12:32am
How many trades until a system is proven, not just lucky?

It should have been ...


How many trades until a TRADER is proven, not just lucky?
  • #19
  • Jan 8, 2014 12:32am Jan 8, 2014 12:32am
Quoting grin
{quote} A system should scale to any TF. Inputs may require adjustments. 50 pip stop on hourly chart is not going to work for 5 min chart. Ideally stop locations should not be defined by fixed amount of pips, but for the sake of simplicity traders assume that 50 covers sufficient number of breakdowns to indicate on hourly chart in the majority of situations that one is wrong. On 5 min chart the same decision should in the majority of situations require fewer pips, but the system stays the same.
I ain't gonna explain this. Maybe somebody will help you - not me...

Babypips may also be useful for you...
The single most important factor is having control of your own life.
  • #20
  • Jan 8, 2014 1:02am Jan 8, 2014 1:02am
Quoting Mikkk01
{quote} I ain't gonna explain this. Maybe somebody will help you - not me... Babypips may also be useful for you...
Certainly, I must be missing something.
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