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whether to change the trading strategy from time to time?

  • #21
  • Mar 15, 2016 5:12am Mar 15, 2016 5:12am
Just my 2 cents. I try to learn from my mistakes. But after the next major losses you think of two things:
- leave forex
- change strategy
at the end, after answering one question the answer becomes evident.
Why not? Yes, leave the strategy with possible flaws would be wrong. But if it was wrong in the basis?
  • #22
  • Mar 15, 2016 5:48am Mar 15, 2016 5:48am
Quoting cat
{quote} It is impossible for a trading strategy which works well and generates income to suddenly stop working, because as long as I've been trading the markets have never changed - human behavior, which is what drives the markets, does not change overnight. They do go through periods of increased or decreased volatility, but apart from that, they are consistent in that a winning strategy should remain a winning strategy. What can change however is you, the trader. If you are suddenly losing whereas before you were winning, if that is indeed what...
I think that is really correct to talk about the study of our mistakes, when it ceases to work strategy. This may be due to different factors: high risk, nervous tension, inattention ...
Market - this is a huge perpetual motion machine, which, allows to earn on it, if properly adjusted to its rhythm.
  • #23
  • Mar 15, 2016 5:52am Mar 15, 2016 5:52am
But I still think that the market - it is not a static structure. It changes his scope. My experience so far tells me so.
  • #24
  • Mar 15, 2016 5:56am Mar 15, 2016 5:56am
Quoting AlexFF
Just my 2 cents. I try to learn from my mistakes. But after the next major losses you think of two things: - leave forex - change strategy at the end, after answering one question the answer becomes evident. Why not? Yes, leave the strategy with possible flaws would be wrong. But if it was wrong in the basis?
In all activities there comes a time when you need to change something or leave. It's like in sports. Either you grow or leave the team.
But we all know that after the fall be sure to rise!
  • #25
  • Mar 15, 2016 6:31am Mar 15, 2016 6:31am
Quoting medici
{quote} That is patently false. You just haven't traded long enough. {quote} Markets do change behaviour, and a key trading skill is the ability to develop and adjust a strategy to fit with the changing markets. That is why it is less than helpful to buy a strategy, pick one up online, or to follow a mentor/guru.
"I have often faced such a problem, when the trading strategy, which held a few months suddenly ceases to generate income. I started to look for new solutions and it takes time and money."

I absolutely stand by my post. Look at the original post to this thread in bold above. This states that a winning strategy, which it was if it was generating income, suddenly stopped working! This does not happen. Strategies need to be tweaked, to be improved upon as part of the continual learning process, but a strategy, developed over time by an individual, does not suddenly stop working.

If the poster was referring to something he purchased or copied from somewhere, and which he/she got lucky with a few times, then yes, it can all suddenly fall apart, but you know as well as I do medici. that a system developed over time, through trial and error, does not suddenly stop working because of some fundamental change in market conditions, or if it does, then I've yet to experience it.
  • #26
  • Mar 15, 2016 6:59am Mar 15, 2016 6:59am
Quoting medici
{quote} That is patently false.
That is patently true!
  • #27
  • Mar 15, 2016 7:39am Mar 15, 2016 7:39am
Quoting DenForex
{quote} I think that is really correct to talk about the study of our mistakes, when it ceases to work strategy. This may be due to different factors: high risk, nervous tension, inattention ... Market - this is a huge perpetual motion machine, which, allows to earn on it, if properly adjusted to its rhythm.
Agreed 100%. there may be any number of factors why we enter losing streaks apart from the fact that as a probability game these will inevitable happen. A losing streak can prompt one to change our strategy unnecessarily, and this can lead to further losses. That said however, confidence in one's strategy beyond the short term should prevent this, but without the confidence that consistent favourable results generates, it is easy to hop from one strategy to another, from which, it may seem, that it is the market that is changing rather than your own inconsistency. I have found, and this is my own personal opinion based on my own experience, that once you have a good, solid system which you know produces winning trades if followed, you will not have to do more than tweak it in an effort to improve upon it. A complete overhaul can either mean that this system wasn't working in the first place, or it can mean that there is something going on with you that has led to this sudden downturn, and the answer will not be found in your system.
  • #28
  • Mar 15, 2016 8:02am Mar 15, 2016 8:02am
There are a range of different market conditions that can extend for considerable periods of time before they dissolve. For example, since 2002, simple mean reversion strategies have tended to work exceedingly well in the diversified futures, forex and equities asset classes whereas prior to that period, trading mean reversion was a curse.

Have a look at the results of a simple mean reversion strategy applied to the S&P500 between 2002 and 2013. Not a bad equity curve and quite consistent performance even through the turbulent GFC.

Attached Image (click to enlarge)
Click to Enlarge Name: Market Short Term.JPG Size: 99 KB


Now have a look at that same strategies performance prior to 2002.

Attached Image (click to enlarge)
Click to Enlarge Name: Market Long Term.JPG Size: 95 KB


The bottom line is that it is highly unlikely that a single strategy will stand the test of time. It is therefore more prudent to have a range of different strategies that respond to different market conditions. Van Tharpe identified 6 broad market conditions that pretty well span the options.

Attached Image (click to enlarge)
Click to Enlarge Name: Van Tharpe Market Conditions.JPG Size: 23 KB


It is a good idea if you want to play this game for the long term to have a range of strategies that can respond to these varying conditions and apply weightings, adaptive techniques or rotational methods to take advantage of current market conditions.

Unfortunately you can't predict when conditions will change so you need to get creative in how you can successfully adapt to changing conditions. That is why backtesting is so important as it gives you statistical data that you can use as a baseline to determine when to rotate systems. Without a baseline, you will not be able to identify when to rotate systems and it is more than likely that you will throw away a good system that might work very well when suitable market conditions re-emerge over time.
  • #29
  • Mar 15, 2016 8:21am Mar 15, 2016 8:21am
Quoting DenForex
Hello, dear visitors. I have often faced such a problem, when the trading strategy, which held a few months suddenly ceases to generate income. I started to look for new solutions and it takes time and money. What do you think, whether in this case, to look for other options, or just stands to be patient?

A very ambiguous question especially when you consider that you never mention even which strategy was used, or the time frames.

Have you tried candle pattern recognition, both single candle and multiple candles?

Have you tried the Daily time frame?

As far as I know, Inside Bars at market high or low worked when Gann was around and they worked today!

Good luck, John
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-03-15_23-11-52.png Size: 41 KB
It takes a lot for me to IGNORE you, but you can try.
  • #30
  • Mar 15, 2016 8:24am Mar 15, 2016 8:24am
Quoting Erebus
{quote} A very ambiguous question especially when you consider that you never mention even which strategy was used, or the time frames. Have you tried candle pattern recognition, both single candle and multiple candles? Have you tried the Daily time frame? As far as I know, Inside Bars at market high or low worked when Gann was around and they worked today! Good luck, John {image}
Hi John. Long time no hear

Hope all is well :-)
  • #31
  • Mar 15, 2016 8:48am Mar 15, 2016 8:48am
Quoting cat
{quote} Agreed 100%. there may be any number of factors why we enter losing streaks apart from the fact that as a probability game these will inevitable happen. A losing streak can prompt one to change our strategy unnecessarily, and this can lead to further losses. That said however, confidence in one's strategy beyond the short term should prevent this, but without the confidence that consistent favourable results generates, it is easy to hop from one strategy to another, from which, it may seem, that it is the market that is changing rather than...
I think that the feeling of when you need to change something in the strategy, and when all the fault of a bad mood trader (just kidding) - comes with experience. In addition, every trader knows the percentage of its risk and potential drawdowns which are developed over time.
One conclusion should do for yourself ... disciplined to stick to the plan for risk management.
  • #32
  • Mar 15, 2016 8:54am Mar 15, 2016 8:54am
Quoting Copernicus
There are a range of different market conditions that can extend for considerable periods of time before they dissolve. For example, since 2002, simple mean reversion strategies have tended to work exceedingly well in the diversified futures, forex and equities asset classes whereas prior to that period, trading mean reversion was a curse. Have a look at the results of a simple mean reversion strategy applied to the S&P500 between 2002 and 2013. Not a bad equity curve and quite consistent performance even through the turbulent GFC. {image} Now have...
Thank you for a very detailed explanation.
Quite informative article. And indeed, a little earlier, we have focused on what is best to keep in a cage a few strategic decisions.
  • #33
  • Mar 15, 2016 8:58am Mar 15, 2016 8:58am
Quoting Erebus
{quote} A very ambiguous question especially when you consider that you never mention even which strategy was used, or the time frames. Have you tried candle pattern recognition, both single candle and multiple candles? Have you tried the Daily time frame? As far as I know, Inside Bars at market high or low worked when Gann was around and they worked today! Good luck, John {image}
I have tried many methods of trade and considered various ways of risk management. Now I trade using forex - patterns and candlestick analysis, as an auxiliary tool for the wave analysis. I use the time frame H1, H4. I'm pretty confident in myself and now my tactic brings me a profit. Thank you for asking.
  • #34
  • Mar 15, 2016 5:31pm Mar 15, 2016 5:31pm
Quoting Copernicus
{quote} Hi John. Long time no hear Hope all is well :-)
Yes, thanks, hope you are too.

Been laying low but getting the hang of this now, or the markets doing what they should be doing?
It takes a lot for me to IGNORE you, but you can try.
  • #35
  • Mar 16, 2016 4:26am Mar 16, 2016 4:26am
Quoting cat
{quote} I absolutely stand by my post.
And this is what you said:

Quote
It is impossible for a trading strategy which works well and generates income to suddenly stop working, because as long as I've been trading the markets have never changed

Copernicus has given a counter-example to your very broad and general statement, and there are countless others.

Quote
but you know as well as I do medici. that a system developed over time, through trial and error, does not suddenly stop working because of some fundamental change in market conditions, or if it does, then I've yet to experience it.

This is where our experiences differ.
  • #36
  • Mar 16, 2016 5:48am Mar 16, 2016 5:48am
Quoting medici
{quote} And this is what you said: {quote} Copernicus has given a counter-example to your very broad and general statement, and there are countless others. {quote} This is where our experiences differ.
Not broad and general at all, if you have a winning strategy, it does not stop working overnight. For the benefit of others, when, in your own trading career, did this suddenly happen? To be able to refute my post so categorically, you must have experience of this having happened, though it can't have been whilst I have been trading unless I have some magic system which somehow transcends all market changes.
  • #37
  • Mar 16, 2016 6:11am Mar 16, 2016 6:11am
Quoting cat
{quote} For the benefit of others, when, in your own trading career, did this suddenly happen?
Yes, I've experienced this more than once with strategies I've traded. In recent years, this has followed the volatility cycles of the market. For example, eur/usd behaved differently in the periods 2007-09, 2010-12, and then after that, at which point I stopped trading it. And there are plenty other examples.

Quote
To be able to refute my post so categorically, you must have experience of this having happened, though it can't have been whilst I have been trading unless I have some magic system which somehow transcends all market changes.

Maybe you do. For the benefit of the thread starter, and all other readers, I think the observation that markets do change behaviour, which may cause strategies to fail, is worth corroborating. Whether you experience this is obviously strategy dependent.
  • #38
  • Mar 16, 2016 8:09am Mar 16, 2016 8:09am
Quoting medici
{quote} Yes, I've experienced this more than once with strategies I've traded. In recent years, this has followed the volatility cycles of the market. For example, eur/usd behaved differently in the periods 2007-09, 2010-12, and then after that, at which point I stopped trading it. And there are plenty other examples. {quote} Maybe you do. For the benefit of the thread starter, and all other readers, I think the observation that markets do change behaviour, which may cause strategies to fail, is worth corroborating. Whether you experience this is...
Okay, firstly, I've never traded eur/usd so I wouldn't know, but that's just one example of course. May I refer you back to my original reply to the original post ( copied below ) because I was replying to this poster claiming that his hitherto successful strategy he'd held for a few months ( not nearly long enough for starters ), " suddenly " stopped working, which from my own experience has never happened, and I would still contend that this is impossible to the extent that it can no longer be traded using that strategy, or even a modified version of it. What I never said was that markets never change, only that they do not change "overnight ". Take the Dax for example. When I started out in 2007 it was far less volatile than it is now, not that it helped me then because I was a complete beginner , but it was recommended to me because it was supposedly one of the easiest indecis to trade. Now however, it is much more volatile and one of the most difficult, but this is not something which suddenly happened and it has been possible to adapt one's strategy accordingly, as it always should be if the strategy itself is sound and well tested.

I would like to hear back from the original poster, as I'm sure there is some other issue perhaps he has not divulged which would throw more light onto why his " income generating strategy " suddenly stopped working.

"Hello, dear visitors.

I have often faced such a problem, when the trading strategy, which held a few months suddenly ceases to generate income. I started to look for new solutions and it takes time and money.

What do you think, whether in this case, to look for other options, or just stands to be patient?"
  • #39
  • Mar 16, 2016 8:45am Mar 16, 2016 8:45am
i think it's essential to re-asses your strategy at frequent intervals as market conditions evolve and sentiment changes.., especially if trading on higher frequency basis.

Also depends very much on the underlying asset, I have traded Gold and Oil for years and literally had to completely change my strategy for those, whereas for some of the majors I trade my signals still work to some extent over the years
  • #40
  • Mar 16, 2016 9:11am Mar 16, 2016 9:11am
Quoting cat
{quote} Okay, firstly, I've never traded eur/usd so I wouldn't know, but that's just one example of course. May I refer you back to my original reply to the original post ( copied below ) because I was replying to this poster claiming that his hitherto successful strategy he'd held for a few months ( not nearly long enough for starters ), " suddenly " stopped working, which from my own experience has never happened, and I would still contend that this is impossible to the extent that it can no longer be traded using that strategy, or even a modified...
When I created the branch, I really thought about why I didn't like one, two, three strategies that didn't work (here I mean it is no enought profit). The question was: You have to wait or to change strategy.
The answer that was on the surface - patience and work. Thank you, dear subscribers, you helped me a lot in that time, when I had difficulties. After some time, I realized that the problem was not in the strategy and how I use it. Now, I consider myself self-sufficient trader. I found my niche.

Have a nice day.
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