All trading systems fail

[jsc]

I am not sure we talking about the same type of systems. I was referring to the type used by large institutions, not something sold over the internet. I was referring to the benefits/negatives of a black box as opposed to the employment of a prop trader. I was also talking in the context of indices and stocks, not fx which I do not trade.

Most traders fail because they are crap. Many trade technical signals, such as RSI or stochastics, with no idea of the mathematics behind them. As for the idea that price behaviour cannot change, that is frankly idiotic.

The most successful traders follow the crowds, they try neither to second guess them or to lead them. If you understand the parameters used by large institutions' prop traders and black box systems and can create a system to emulate their activity, life becomes far easier. However, if you automate that system and thus eliminate all fundamental factors, you may find your system buying long against a perfect technical backdrop, encompassing a huge range of technical factors and timeframes, only to find the trades being constantly stopped out due to unforseen fundamental factors, such as a profit warning for example. Bearing in mind the average Black box utilises a HTF approach and thus executes approximately 700 trades a second, losses can mount up fast...

 

[Liquid validity]

Or if you prefer you can wait for your stochastic to cross out of overbought...lol:

Anyone who is reliant for entry on indicators or uses them in a standard way will fail. Agreed.

If you just use them as a quick visual heads up and don't take them as gospel whats the problem with that. Skip to 01:14 on the hompage video - trading desk with an oscillator under the chart.
http://www.h2omarkets.co.uk/

Mr charts from this forum uses indicators as well:
http://www.trade2win.com/boards/us-stocks/38036-how-make-money-trading-markets.html
Indicators aren't the problem, over reliance and the way they are used is.

I don't think FA is over either, it is in the same place it was in the 1930's and 1970's - i.e. currently untrusted. Doesn't mean that will always be the case.
http://stockcharts.com/charts/historical/djia1900.html

 

[FX Bandit]

Most traders fail because they are crap. Many trade technical signals, such as RSI or stochastics, with no idea of the mathematics behind them. As for the idea that price behaviour cannot change, that is frankly idiotic.

Price behaviour does not change because it simply cannot change. It is not possible. The market was the same 100 years ago as it is now.

 

[FX Bandit]

Let us assume the market becomes extremely volatile with an equal increase in uncertainty, and this lasts for years.As an example, it moves up 100 to 200 pips a day and down , and then down 100/200 pips within minutes, and it moves up and down upto 200 pips several times a day .We would have increase in trend failures, stop losses would get hit more frequently and none of the trading systems would make money.

Why would stops be hit more frequently? lol:

You have never actually placed a trade in your life, have you?

 

[jsc]

Because the brokers reading the news are selling the stock on the news whilst the black box is buying on the technicals.

You are so far out of your depth talking to me about trading that I am struggling even to see you down there.

 

[oildaytrader]

It's a shame you spent $1mio developing your systems isn't it, if they're going to fail.

The writing in the link is amateurish, which is why it probably appeals to you. Let's think about the statement "the majority of trading systems fail".

Define "fail". Let's say I purchase 3 systems, 2 of which I switch off after losses of 20% but the third makes 200%, then most of these systems have failed but I'm still nicely in profit.

Actually I'm bored even responding to your post, ODT. You've never said anything vaguely insightful, relevant or meaningful in the past and I doubt you're about to start now.

I use 44 systems simultaneously , if some systems are failing the rest of the systems make money, they make money .

It is difficult to operate 44 systems if you are a manual trader.

The insightful part is multiple systems complementing each other don't always fail .

 

[FX Bandit]

Because the brokers reading the news are selling the stock on the news whilst the black box is buying on the technicals.

You are so far out of your depth talking to me about trading that I am struggling even to see you down there.

Is that aimed at me? It is possible that we are talking about different things - either that or you do not know what you are talking about.

You mention, for instance, that you are talking about certain markets but not forex, as though it makes the slightest difference. It does not.

Price behaviour has always been the same and always will be the same, because it cannot change. If people are employing "systems" that cannot cope with this simple fact, well their losses are the penalty one pays for being foolish and idle.

I hope for your sake that your trading ability is greater than that which you enjoy in the employment of metaphors.

 

[FX Bandit]

I use 44 systems simultaneously , if some systems are failing the rest of the systems make money, they make money .

It is difficult to operate 44 systems if you are a manual trader.

The insightful part is multiple systems complementing each other don't always fail .

wait...just need to...no...



Oh, OK, that's better, I nearly...



I think I'm OK now, wow that was one of the funniest...



Sorry, I'm just going to have to go and lie down, my sides are starting to ache...

 

[wackypete2]

It's a shame you spent $1mio developing your systems isn't it, if they're going to fail.

hehe... I don't what's funnier, ODT, or the way he gets under your skin. lol

Peter

 

[Vaco]

I would say most of the systems out there are based on some sort of technical analysis. So it's mainly to do with fear and greed and how those emotions affect the price action by forming certain patterns that can help traders predict future price moves. All this is OK so far as there are no interventions from big players and it seems there are lots of them (interventions) at the moment. Just recently BOJ bought billions of $ and I don't think they would stop any time soon (as long as they see JPY being too strong). Also some other currencies may be subject to some sort of interventions.
IMO All this makes it difficult for technical analysis.
How long is it going to last? - If I'm not mistaken last time BOJ intervention lasted for more than a year.

Why does it make it difficult for Ta? TA is a graphical representation of price, if boj is buying $ this will be seen in the chart as a downward trend for the yen.

TA does not drive price, it just makes it easier to see where its been to allow us to come to a decision as to where it might go, followed by where we should jump on board and where we should put our stops.

Sometimes in developing a rule set for entering trades based on ta we get confused and think that that the market should conform with our rule set/TA.

We forget to look at our set ups in context to what is going on in the market, in effect we lose sight of the bigger TA picture.

For example if I trade off support resistance with sound TA and a good rule set I'd still be daft to be buying the yen at previous support levels.

Ramble over

 

[FX Bandit]

hehe... I don't what's funnier, ODT, or the way he gets under your skin. lol

Peter

ODemoDT is superb value.

Before reading his posts it is advisable to remove one's trousers and under-crackers, replacing them with extra large nappies, such as those sold for the benefit of the incontinent, or such persons who like to indulge in unwholesome leisure activities (WirralTraders, I'm not necessarily talking about you, so endeavour to restrain your paranoia for once).

The reason for donning such an unflattering garment is that his efforts to convince an uninterested public that he actually trades are as near as is possible in this world guaranteed to make you f***ing p1ss yourself laughing.

 

[wackypete2]

I always knew this forum was funnier on the weekends when no one is trading. :cheesy:

Peter

 

[tomorton]

Can't see the point of this debate. 'All trading systems fail' translates as no system guarantees profitable exit on 100% of the occasions it is used. That's why stop-losses were invented. It's why the age-old theory of diversification is still applicable. We all knew all this already.

ODT' makes an interesting and logical point with regards his 44 systems. This is diversification of systems, rather than the traditional diversification of assets and asset classes but it makes just as much sense as a means of diluting risk. The trader who relies on a single approach to trading will find that system will hit a period which is so seriously damaging that he may be wiped out, even though being a religious follower of the chosen system without the slightest modification.

 

[wackypete2]

Let's see if this makes sense. If you use a system that would get you wiped out at some point, than that is bad....but if you diversify and use 44 different systems that all at some point would get you wiped out, thats good??

If any one of those 44 systems would never get you wiped out then why would you even bother with the rest??

If one system will potentially wipe you out then using 10 of them will get you there in 1/10th the time.

Must be my brain on drugs.

Peter

 

[wackypete2]

Let's look at this from a different view. Suppose I am a seller of systems. My sales promotions could go like this: "I have a this wonderful system to sell you. Make great money, but could potentially wipe you out so I don"t recommend using it alone. To avoid that can also sell you these other 9 systems to go along with it so you can be diversified"

Peter

 

[oildaytrader]

Why does it make it difficult for Ta? TA is a graphical representation of price, if boj is buying $ this will be seen in the chart as a downward trend for the yen.

TA does not drive price, it just makes it easier to see where its been to allow us to come to a decision as to where it might go, followed by where we should jump on board and where we should put our stops.

Sometimes in developing a rule set for entering trades based on ta we get confused and think that that the market should conform with our rule set/TA.

We forget to look at our set ups in context to what is going on in the market, in effect we lose sight of the bigger TA picture.

For example if I trade off support resistance with sound TA and a good rule set I'd still be daft to be buying the yen at previous support levels.

Ramble over

Sounds like another old fart who doesn't know which charts to look at , when trading the usd yen.Sometime looking at euro/usd charts tells more about what usd/yen pulse, but other times looking at usd /yen charts tells more about euro/usd pulse, either way the twot is confused.

and meanboy is so confused with systems , O D T brung his out his vitreol.

 

[oildaytrader]

ODemoDT is superb value.

Before reading his posts it is advisable to remove one's trousers and under-crackers, replacing them with extra large nappies, such as those sold for the benefit of the incontinent, or such persons who like to indulge in unwholesome leisure activities (WirralTraders, I'm not necessarily talking about you, so endeavour to restrain your paranoia for once).

The reason for donning such an unflattering garment is that his efforts to convince an uninterested public that he actually trades are as near as is possible in this world guaranteed to make you f***ing p1ss yourself laughing.

Nappies are only required when masturbation trading takes place.

ODT is the only real McCoy trader.

 

[FX Bandit]

Nappies are only required when masturbation takes place.

ODT is the only real McCoy trader.

So you do trade - you buy and sell crisps. From that I would conclude that you run a small convenience store in a poor, predominantly white area. Your trading goes thus:

You buy crisps and doubtless other comestibles at a cash and carry. You sell these to your customers, who purchase them along with 20 Regals, a 4 pack of Export and a copy of the Sport.

Aside from this, if you require nappies in order to masturbate satisfactorily, you really should keep that fact to yourself.

 

[tomorton]

Let's see if this makes sense. If you use a system that would get you wiped out at some point, than that is bad....but if you diversify and use 44 different systems that all at some point would get you wiped out, thats good??

If any one of those 44 systems would never get you wiped out then why would you even bother with the rest??

If one system will potentially wipe you out then using 10 of them will get you there in 1/10th the time.

Must be my brain on drugs.

Peter

You know that's a false argument. Diversification involves reducing your investment in any single instrument such that, even if one suffers a 100% loss, your remaining holdings will keep you financially viable. Of course, if ODT is using 44 different systems that all act in the same manner, such that all 44 could crash at the same moment, that would not be true diversification, but I can't believe that he makes such an elementary error.

 

[tomorton]

Let's look at this from a different view. Suppose I am a seller of systems. My sales promotions could go like this: "I have a this wonderful system to sell you. Make great money, but could potentially wipe you out so I don"t recommend using it alone. To avoid that can also sell you these other 9 systems to go along with it so you can be diversified"

Peter

Vendors are selling the dream, not the bed.