Systems

I was going to post this in bbmac's "Your Trading Edge Dilemma" topic but I thought I would start another one.

After spending a lot of time looking around this site and obviously a couple other forums as well, I notice that there are probably hundreds of free systems that are posted up by members that are proven to work. Now the first thing I thought to myself was "if these all make money, why do 95% of people still lose"?

does money management ruin them or do they hit a rough patch and abandon the "trading edge"? How is it possible to not make money from a system that has been proven to make money? Does the system not actually work at all? (By the way I'm not referring to the certain system I'm following at the moment, I mean in general). There must be some reason why or the whole forum would be making easy money.

Now on the flip side, I also remember reading a post somewhere and I'm sure you've all heard it, that said "There's only 2 types of discretionary traders... the traders that have blown up and the traders that are about to". How discretionary is a discretionary trader? I took that to mean someone who has a system is using specific entries and exits related to that system whereas someone who is discretionary trading will plot S/R lines, place a stop using MM and take profits before the next S/R line. Or is that a system in itself? Is it purely the psychology that seperates a profitable trader from one that loses?

I really shouldn't stay up late thinking about these things!

brewski1984 said:

After spending a lot of time looking around this site and obviously a couple other forums as well, I notice that there are probably hundreds of free systems that are posted up by members that are proven to work.

Click to expand...

Thats one big assumption.

brewski1984 said:

does money management ruin them or do they hit a rough patch and abandon the "trading edge"? How is it possible to not make money from a system that has been proven to make money? Does the system not actually work at all? (By the way I'm not referring to the certain system I'm following at the moment, I mean in general). There must be some reason why or the whole forum would be making easy money.

Click to expand...

Assuming a system has been scientifically developed tested and passed live testing etc, position sizing/money management is one way to turn a winner into a loser. Its critical not to overtrade (position sizing to large relative to capital). The other obvious one is not following the signals for whatever reason (more likely than not emotional).

I agree with the poster above,...don't be foolled by these systems, even if they work for the originator, it is very difficult to get that trading edge to work for you, beacuse it was designed by them/for them. Also, generally you have to have a healthy degree of skepticism about anything posted on an open forum.

Having a proven Trading Edge and developing the right psycholigical framework/tools to profit from that edge are 2 seperate things.

Some traders may have a 'promising' system that they consider is a trading edge but know insufficient about it so that if they get a consecutive losing run or a general period of drawdown they do not know whether that falls inside the overall frequencies of that trading edge...it may well do and so it is just the edge performing as it has done to historical parametres or it may not do and it falls outside historiocal parametres which give cause for concern, - but they don't know. In any event they would probably lose confidence in it/themseloves and junk it and move on to the next one.

So not only msst you have a trading edge you need to know how it performed historically and it's typical . maximum, probable and possible parametres experienced at the strike rate. You need tro know if your strike rate is performing 'normally' or that it has stopped performing to those parametres...Most do not.

Regarding discretionary trading edges, unless they are EA's / Robots placing the trade, they are all discretionary as we all make the decision at the point of set-up whether to go in or not. A trading Edge however performs best when you are able to take as much discretion/emotion out as possible such that you have a clearly defined set-up (s) and if the set-up doesn't develop - you don't enter the market...no nearly's or almosts - just those that meet the pre-defined criteria/rules of your trading edge.

A lot of things seperate a winning trader from a losing trader but it starts with having and knowing about a proven trading edge...then developing the right psychology to trade that edge, and then having first hand experience at doing so - to the standard of consistent gain over a meaningful representative period.

G/L

brewski1984 said:

I was going to post this in bbmac's "Your Trading Edge Dilemma" topic but I thought I would start another one.

After spending a lot of time looking around this site and obviously a couple other forums as well, I notice that there are probably hundreds of free systems that are posted up by members that are proven to work. Now the first thing I thought to myself was "if these all make money, why do 95% of people still lose"?

does money management ruin them or do they hit a rough patch and abandon the "trading edge"? How is it possible to not make money from a system that has been proven to make money? Does the system not actually work at all? (By the way I'm not referring to the certain system I'm following at the moment, I mean in general). There must be some reason why or the whole forum would be making easy money.

Now on the flip side, I also remember reading a post somewhere and I'm sure you've all heard it, that said "There's only 2 types of discretionary traders... the traders that have blown up and the traders that are about to". How discretionary is a discretionary trader? I took that to mean someone who has a system is using specific entries and exits related to that system whereas someone who is discretionary trading will plot S/R lines, place a stop using MM and take profits before the next S/R line. Or is that a system in itself? Is it purely the psychology that seperates a profitable trader from one that loses?

I really shouldn't stay up late thinking about these things!

Click to expand...

Profitable "systems" aren't read about on the internet or in a book, the old adage " those that can do, those that can't teach" springs to mind here. Why would anyone give you their trading edge, the more people using it dilutes the edge you have over other market participants. Remember you're not trading companies or indices, you trade against other traders!!!

Rigid strategies IMO are not applicable to the majority of today’s markets, to be successful now you need to have a diverse arsenal of knowledge and application at your disposal with the discipline to plan your trade and then trade your plan. This can only be achieved after you have tried, tried and then tried again....even then you don't get a guarantee of achieving anything at the end of your efforts.

alloy said:

Profitable "systems" aren't read about on the internet or in a book, the old adage " those that can do, those that can't teach" springs to mind here. Why would anyone give you their trading edge, the more people using it dilutes the edge you have over other market participants. Remember you're not trading companies or indices, you trade against other traders!!!

Rigid strategies IMO are not applicable to the majority of today’s markets, to be successful now you need to have a diverse arsenal of knowledge and application at your disposal with the discipline to plan your trade and then trade your plan. This can only be achieved after you have tried, tried and then tried again....even then you don't get a guarantee of achieving anything at the end of your efforts.

Click to expand...

This premise has been debated many times in this forum. Some research on your part may inform you otherwise.

A trading system is made up of two key elements; the strategy and the trader. As has been pointed out, the more likely to fail is the trader. And there are so many way the trader can do it.

One way to deal with this is to attack each of the many ways a trader can fail and work on improving that weakness. Lots of money can be lost and lots of time can go by with that method.

Another way to address this is to put in place a quality assurance process that may detect failure early enough to minimize losses. Detecting failure, then analyzing the cause and then addressing that cause provides a way for you to prioritize the list of causes to focus your efforts at addressing weaknesses.

The way to do this is highly individualized. For me, the key is the trading journal. I record every trade and why I made it. My most frequent fault is unforced errors due to lack of focus or getting hurried. And it's in my permanent record so that it is hard for me to ignore.

Trading discipline is generally not a problem for me. I expose my journal here and elsewhere. Knowing that I am going to expose my trades keeps me from straying from my rule set.

A failed trade can be due to a trader failure, or one of the losses to be expected with the strategy or systemic change in the market rendering the strategy less effective or not effective at all. The journal analysis over time can assist you in determining the cause of the failed trade.

It is my contention, but not universally accepted here, that this quality assurance program greatly shortens the time required to make the practitioner a successful trader.

Very well put Howard, i respect your view point.

What i meant about "systems" is that expectation of a new/improving trader being told the parameters to instigate a "good" trade and then being able to reproduce that with risk on the line is erroneous. Trading isn't a simple formula, it is a personal relationship between you and the market, it highlights your strengths and weaknesses. IMO your personality and its application towards which markets and what metheods you use is the make or break towards a sustainable career trading.

Thanks for the replies. I guess what you're all saying is there's no shortcut or easy way, what works for one person won't work for anyone else because we are all different. The system that each individual uses needs to be created and completely understood from scratch by the person using it.
I wasn't assuming that all systems posted on the Internet actually work, but there are so many posted that some must do if only for the creator at least.

A lot of great advice in here, i was hoping it would create some good discussion.

brewski1984 said:

Thanks for the replies. I guess what you're all saying is there's no shortcut or easy way, what works for one person won't work for anyone else because we are all different. The system that each individual uses needs to be created and completely understood from scratch by the person using it.
I wasn't assuming that all systems posted on the Internet actually work, but there are so many posted that some m do if only for the creator at least. A lot of great advice in here, i was hoping it would create some good discussion.

Click to expand...

FF.com is amazing re systems, amazing in that on many of the threads outlining a 'system' on the 'systems' section of the forum, the originator has long since left the thread and the system as of the last post bears no relation to that posted up by the long since departed thread starter/system developer. Lol. I think a lot of these systems are 'works in progress' and too often folk throw their money on them without knowing all you need to know about a Trading Edge and what Trading is and whether it qualifies.

G/L

HowardCohodas said:

This premise has been debated many times in this forum. Some research on your part may inform you otherwise.

Click to expand...

D1ckhead.

The obvious answer is the true answer - most of these "systems" don't work. What you see on these threads is a short period of cherry-picked data.

The same is true of most educators. Some might be fine, some are useless traders but you can still learn from them, and the vast, overwhelming majority are simply parting mugs from their money because they have no other way of making money from "trading".

That is the truth and if you don't like it you'll spend a lot of money before you give up in despair.

One thing that people don't seem to grasp is that following your own path is vital for most. When it comes to trading live, the process of discovery (and the fact that you have made those discoveries yourself) is crucial to being able to properly follow your chosen method.

Pazienza said:

One thing that people don't seem to grasp is that following your own path is vital for most. When it comes to trading live, the process of discovery (and the fact that you have made those discoveries yourself) is crucial to being able to properly follow your chosen method.

Click to expand...

Exactly, belief and understanding can't be bought in any system