If you must buy a trading system...

How do people learn to drive a car?

Do they learn to drive a car by riding in a Taxi?

No. The ones I know have learnt from someone else, usually in exchange of money.

But hey, what do I know?

The point is that trading other peoples' systems will teach you about trading other peoples' systems (riding in taxis will make you good at riding in taxis). And that's just a tiny part of mastering trading just as riding in taxis is a tiny part of learning to drive (whether you paid to learn or achieved it by some other means).

On the other hand I think your post was a good analysis of "how to trade other people's systems" having personally buried over 50,000 in a black box before I gave up and started learning to trade.


Edit: And lets be fair: you did say "if you must" after all.

As a trader, I definitely understand the resistance on the part of those who already are successful traders to using someone else's systems. The thing is, there are people who do not want to learn to daytrade and they have lots of good reasons. Often they want the diversification available to daytraders as most often daytraders are uncorrelated to pretty much everything yet understand that their time is more effectively spent doing what they do best (e.g. running their business or performing their full-time job). They also do not want to commit the relatively large amount of capital usually required to open a managed account with a successful daytrading CTA. For these people, trading someone else's systems through a managed systems broker makes a lot of sense and many folks do successfully accomplish their goals in this manner.

jj

A thoroughly objective reply from a managed systems broker

I don't think it matters if it's end of day or not, a system is a system to a lot of people.

Black box means that the seller has something to hide. If you don't know what's behind it, you are at it's mercy. Also what happens if the software needs upgrading or something changes or they announce an improvement etc. . . omnitrader do this crap all the time . . .

If he/she uses her/his own "feel" then the point is void and null. You might as well talk gibberish then.

I don't get this: if he/she trades it everyday why sell it to anyone? Nobody gives away money for free (apart from charitable organizations and the odd anomalies here and there). Or else they could be using you as their guinea pig so they feel that you're part of the experiment too . . . Only those that sell something like this have a deep insecurity about the system itself.

I can nearly 100% guarantee that anyone who sells systems never do full time trading to consistent profitability. In the same vein that van Tharp/Elder and other such authors writes books about trading psychology, but CANNOT trade. If they could trade they would, instead they have elaborate websites and organize expensive seminars to lure the unwary. They harp on and on about the same things over and over again, and for some strange reason they proclaim that they're "gurus" LOL!!!

You know photoshop is pretty good at making bogus reports. So too is the one long and one short trade on the same stock done to get massive cheques from spreadbetting companies? Those who make big money trading would spread their accounts over different brokerages and do some other minimal tax maneouvres. And if you were making that much money you won't be shouting to everyone about it!

Trusting other's judgement for them would be totally stupid. If you can't do your own research and decide for yourself you have every right to be conned. That was me many years ago. . . . Anyone's cousins/uncles/nephews can make bogus references as to how great the person is. Some people just say nice things at the beginning but it's a different picture later on.

Again, do your own research. But then, we are assuming that the person selling is honest? Why should he be, what's in it for him to be? He can give you even more BS in the process to confuse you.

Statistics, equity curves etc. . . mean nothing. That is in the past and has already past. If the seller of the system can guarantee you the future, why would he need to sell to you? If you want to talk about statistics then by the strong law of large numbers there is no such thing as a maximum draw down. It is a trivial corollary that if there is a chance of a draw down, there exists the a chance of having your entire account wiped out. They don't tell you that because it's not palatable. . .

You never get your money back period. Why would the seller bother to stump up money in advertising, promoting etc. . . and make himself/herself open to a possibility of all that hard work going to waste? Nah, they'll get you in the small print . .

drawdowns have a nasty habit of getting worse when you put your money on the line, when you have your hope of a livelihood on the line. What always happens is that you get wiped out.

The market NEVER gives away her hand that easily.

If anyone is thinking of buying a system my advice is DON'T - none of them work. Look for the free ones and play around with them with paper trades if you are curious (and they are nothing but pieces of curiosity), but ALL of them are sold by people who ultimately cannot trade (or think it's too risky to put their own money on the line), which is why they are for sale.

As a biological mathematician I have a cynical view of life in general, and the one thing that the natural world has taught me is that nothing is ever given away for "free". In human life, money is the one resource that separates you from having a 9 - 5 obligation 5 days a week, and a life of time mostly on your own terms. The steps to get to the latter situation is NEVER given away "freely" or so easily.

Agree, in terms of purchases: sometimes you get what you pay for, often you don't. No one gives away money.

The great "free" things in life are people's help, friendship and good deeds.