Design a BAD trading system

[meanreversion]

We all know it's impossible to buy a "good" trading system on the internet.. after all, if it makes money why would anyone sell it?

Alright, so different traders approach trading and risk in a variety of ways, so what might be a "good" system for one trader might not work for someone else.

But this got me to thinking.. we're all obsessively trying to improve our trading, whether through better money management, perhaps using a different indicator, maybe trading a new market.

What if we were asked to design a system that LOSES money. Is this possible? (I'm going to exclude trivial systems, such as one that legs into EUR/CHF through EUR/USD and USD/CHF and then legs out again, just losing money through crossing bid/ask).

I want to know what would make for a truly terrible system. Because if we know, then surely we can exclude these methods in looking for a good system?

(By the way, this thread is not meant to be flippant, it's more of a thought provoking exercise)

 

[Martinghoul]

How about this? A method that systematically sells deep OTM strangles, say, 1w to maturity, at mkt.

 

[shadowninja]

Easy. If it's gone up and looks like it is too high (ask a noob), then sell with a target of 1 pip and a stop of 100 pips. Reverse for a bear market. 80% probability of profit.

 

[Mr. Charts]

Ask the experts for help, everyonerich, fcta, for example.

 

[arabianights]

All you need is terrible money management. Don't need a losing system.

 

[scose-no-doubt]

How about highly leveraged spreadbetting on forex markets. Buy support/sell resistance with a fixed target and stop at 2:1 RR

 

[0007]

You would need to design a system that is structurally inefficient and a loser, so that the odds are stacked against you no matter how good a trader you are (though if you were good you'd not touch it with a bargepole), no matter how lucky you are, no matter how good your risk management or psycho approach. Bit like reverse roulette; I think socialism might be a good model.

I suspect that when you come to do it, that this is not the trivial problem it might seem at first - every half-decent trader should be able to make a random selection system profitable over a period of time.

In order to accomplish this project I think you first have to design a profitable system knowing what the variables are that make it profitable and their effects. You then systematically degrade some or all of their effects to achieve the degree of badness you want. Of course, you could just practice reckless money management (as has already been suggested) and blow the account. But it would take real skill to design a system that would last - say, for a given length of time.

 

[LiamH]

Yeah, apart from bad money management this is a surprisingly difficult thing to do. Obviously, if you can build a strategy that loses money consistently then you already have a profitable strategy - Just trade the losing one the other way... ie. when that says buy, you sell etc.

 

[Hoggums]

Buy and sell at the same time - no stoploss but take profits after 20 pips on each trade. Once you've taken profits open up another buy/sell combination.

 

[Rossini]

A very sensitive (choppy) mean reverting strat on a daily TF.

 

[Trader333]

Yeah, apart from bad money management this is a surprisingly difficult thing to do

I don't think it is that difficult and all you need to do is to day-trade Forex using a SB platform around 20 times a day with a 2% of your account risk per trade

I can almost guarantee that you will lose all of your account over a given length of time.


Paul

 

[LiamH]

I don't think it is that difficult and all you need to do is to day-trade Forex using a SB platform around 20 times a day with a 2% of your account risk per trade

I can almost guarantee that you will lose all of your account over a given length of time.


Paul

Sorry, what I meant was that if you could design a complete losing strategy then surely all you need to do is trade the opposite direction of it's signals. I didn't mean that I think it's hard to lose money, I know that's easy!

 

[Shakone]

Trade against the long term and the short term trend. Just enter at a random time. Make your profits less than your losses. That ought to do it. Averaging down too, would help.

 

[Black Swan]

All you need is terrible money management. Don't need a losing system.

So on the money, take one pair, enter kinda randomly based on a hunch off a low TF; it's going up, it looks like it's going down, and if the MM is sound you probably won't go bust..

 

[Black Swan]

How about no price on charts, just a couple of indicators...? Come to think of it I reckon I could make that 'work'...

 

[Rossini]

Try it ;-)

 

[shadowninja]

Simply, fire up the 5 minute charts and only trade when you're bored.

 

[Shakone]

So on the money, take one pair, enter kinda randomly based on a hunch off a low TF; it's going up, it looks like it's going down, and if the MM is sound you probably won't go bust..

I think you will still go bust if your profits are less than your losses, especially if you are aiming for 10 pips or less, but with good MM it will be a slow bleed.

 

[Black Swan]

I think you will still go bust if your profits are less than your losses, especially if you are aiming for 10 pips or less, but with good MM it will be a slow bleed.

problem is you'd have to be a total noob, your hunches would probably be decent PA calls...but yeah, you're right...Damn back to the drawing bored*..harder than it looks this...

* did you see what I did there..?

 

[bbmac]

I think you will still go bust if your profits are less than your losses, especially if you are aiming for 10 pips or less, but with good MM it will be a slow bleed.

What if you have a 95% strike rate (winning trades as a % of total) of +10pips (+) and a stop of -20...my point is that yes a positive expectancy is always preferable but strike rate too is important in this respect.