Mar

16

Trading System’s Results – Week 48 – 4-Minute Drill for Traders

Posted by 5 Comments

In this week’s 4-Minute Drill, I talk about some red flags to look for when reviewing a system’s track records.  Also I discuss what to keep in mind when picking a system that’s right for you.

What do you look for when reviewing a trading system’s results?  Let us know… just hit the comment link below!

Norman Hallett here with you next 4 Minute Drill for Traders.

Picking a trading system to trade with is a daunting task.

… and one of the things we tend to look for to judge whether we want to adopt a trading system is that system’s ‘track record’…. and that can be a problem.

“Track Records” are a tricky thing… and the reason they’re tricky is because the author of a tracing system can ‘frame’ a track record to look better than it really is.

Here are a couple of things to beware of…

I came across a site last week that showed a great track record.. and they were very detailed about what traders were taken… so it looked good on first blush…

… but when I looked closer, I noticed that the trades were made in 2008! This fact wasn’t part of the ‘sales copy’ I was reading… so you’ve got to consider that a red flag.

When I inspect track records, I want to see recent trades as well as more historic trades, and you should, too.

Another red flag is when I see track records of very short duration… say less than 6 months… and I’ll tell you why…

Most markets have seasonal tendencies…. the stocks have Santa Claus rallies, and choppy summers, etc, etc., and the grain markets have weather and harvest seasonals.

I want to see a track record long enough to span through all phases of the markets I’m trading.

Although, in most cases, you want to SEE a track record, you generally shouldn’t be putting a whole lot of weight on it. They are easily manipulated and many times even mis-represented.

What you SHOULD but a lot of weight on when deciding on a trading system is the WAY the system makes decision and whether that decision-making process is valid.

For me, candlestick analysis makes sense… and I also have a true, mathematical appreciation for the Fibonacci sequence…. so I tend to be attracted to systems that include that kind of analysis.

For YOU, you need to decide what types of analysis make sense to you and seek systems using those methods.

If you do THIS, you’ll feel comfortable running the trading system… and be willing to take short losses more easily and have the patience to allow a winning trade to run.

So, inspect YOUR values FIRST and then find a system that fits YOUR trading values… and keep the right perspective on those STELLAR Track Records that you see… they are less important then understanding the process used to get those results.

OK… that’s it for this addition of 4-Minute Drill for traders.. so until next week…

STAY DISCIPLINED!!!!

Category: 4-Minute Drill for Traders

Comments (5)

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  1. Hello Friends,

    This is really interesting take on the concept. I never thought of it that way. I came across this site recently which I think it will be a great use of new ideas and informations. Thanks a lot.

  2. Judith says:

    Your are right Norman!!!! I like the systems who’s author shows his experience live not just en paper. Unfortunately these systems are few and very costly for little investors. This little investor is force to find a system that fits his/er needs.
    As always, you have a great point to help your followers.Thanks
    Judith

  3. Annie says:

    I came across an advertisement recently for an alert service for the forex. At first glance the results looked great, and I am sure it won over many who looked at the platform print out with the results who didn’t look into it any further. I went back to the dates the trades were placed to see where the entries and exits were. Well, come to find out, even thought the trade eventually resulted in a profit, you had to sit thru a draw down of over 150 pips before it became profitable. Even if you had a small position, this is completely unacceptable and showed that the trader giving the trading advice didn’t really know what he was doing. Steer clear!!

  4. Carol says:

    Very good food for thought, especially the point about digging for the actual date of the example trades.

  5. In YOUR experience, have advertised track records reflected your own trading reality?

    Norman – Administrator

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