Joe Ross
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Recently I was asked the following question: "Any idea of who was the seller of the first mechanical trading system? I heard that it included a whole bunch of phony information."
I have more than a few candidates for that honor. But rather than name names, because I'm not 100% positive which rascal came first, I will just call him Bob Burnem. Burnem was the vendor of "URUN Estupido" (fictitious name for the trading system), which included a false "real time" track record. Trades represented as profitable in his track record actually lost money.
The trader finally admitted he subjectively "ducked losing trades," when confronted with independent testing results of his system. This fraudulently advertised $500,000 "unreal time" track record, never showing his actual trades, was as phony as his money-back guarantee. This scam artist now solicits $50,000 trading accounts in some of the forums, with permission from the forum modulator.
If you feel you have to purchase a system or method, buy independently tested ones, or ones that tell you up front that they may stop working at any time.
An honest vendor will offer you a return policy if the system stops working right after you purchase it.
Talk to traders who have traded or are trading the system or method before considering purchase. A friend of mine who tests systems says, "Of over 200 systems I purchased, less than 10 of the track records were substantiated by my testing. Some systems tested well for a limited time, and were sold after their track records fell apart. A five-year track record is the minimum necessary for any valid trading system."
I don't necessarily agree with the requirement for a five-year track record. I want to know if the system or method has been working recently - for the past 2-3 months is all I need to know. Why? Because I anticipate that any mechanical trading system or method will automatically have a short lifetime. During that lifetime a lot of money can be made. But don't expect it to be the "good fairy" or the "holy grail" of trading. The promoters know this, but few there are who will tell you the truth. Most methods will work for awhile and then fail. If you are patient, they will work again. You must wait. Any method works because of the profile of the market at the time it was tested. However, market profiles change. What works when a market is swinging in a broad range, may not work as well, or at all, when the market is trending or moving sideways in a narrow range. I know this is going to sound like an ad for our methods, but the reality of the situation is this: If you are going to use methods or systems, you need to own a collection of them, so when one method or system no longer works, you have others to fall back on. I learned that from one of the greatest traders I call "friend." He literally collects methods and setups, and trades them when they are working, temporarily setting aside those that are not working. I love his definition of "method" vs "system. He says, "A method is something you can adjust or simply stop trading when it is not producing results. A system is something you must follow through winning and losing periods if you want to have the advertised results." My friend trades only methods. He does not want to experience the major drawdowns associated with following a system.
Some methods and systems are tested and work at a time when the underlying market is in a rarely occurring phase that may happen only once in a great while. When the method or system fails, it may be a very long time, if ever, that it begins to work again. That is the major risk in methods or systems. However, the majority of methods will begin to work again when the market returns to the profile under which it was successfully created.
I have more than a few candidates for that honor. But rather than name names, because I'm not 100% positive which rascal came first, I will just call him Bob Burnem. Burnem was the vendor of "URUN Estupido" (fictitious name for the trading system), which included a false "real time" track record. Trades represented as profitable in his track record actually lost money.
The trader finally admitted he subjectively "ducked losing trades," when confronted with independent testing results of his system. This fraudulently advertised $500,000 "unreal time" track record, never showing his actual trades, was as phony as his money-back guarantee. This scam artist now solicits $50,000 trading accounts in some of the forums, with permission from the forum modulator.
If you feel you have to purchase a system or method, buy independently tested ones, or ones that tell you up front that they may stop working at any time.
An honest vendor will offer you a return policy if the system stops working right after you purchase it.
Talk to traders who have traded or are trading the system or method before considering purchase. A friend of mine who tests systems says, "Of over 200 systems I purchased, less than 10 of the track records were substantiated by my testing. Some systems tested well for a limited time, and were sold after their track records fell apart. A five-year track record is the minimum necessary for any valid trading system."
I don't necessarily agree with the requirement for a five-year track record. I want to know if the system or method has been working recently - for the past 2-3 months is all I need to know. Why? Because I anticipate that any mechanical trading system or method will automatically have a short lifetime. During that lifetime a lot of money can be made. But don't expect it to be the "good fairy" or the "holy grail" of trading. The promoters know this, but few there are who will tell you the truth. Most methods will work for awhile and then fail. If you are patient, they will work again. You must wait. Any method works because of the profile of the market at the time it was tested. However, market profiles change. What works when a market is swinging in a broad range, may not work as well, or at all, when the market is trending or moving sideways in a narrow range. I know this is going to sound like an ad for our methods, but the reality of the situation is this: If you are going to use methods or systems, you need to own a collection of them, so when one method or system no longer works, you have others to fall back on. I learned that from one of the greatest traders I call "friend." He literally collects methods and setups, and trades them when they are working, temporarily setting aside those that are not working. I love his definition of "method" vs "system. He says, "A method is something you can adjust or simply stop trading when it is not producing results. A system is something you must follow through winning and losing periods if you want to have the advertised results." My friend trades only methods. He does not want to experience the major drawdowns associated with following a system.
Some methods and systems are tested and work at a time when the underlying market is in a rarely occurring phase that may happen only once in a great while. When the method or system fails, it may be a very long time, if ever, that it begins to work again. That is the major risk in methods or systems. However, the majority of methods will begin to work again when the market returns to the profile under which it was successfully created.
