Can Simple trading systems work in todays market ?
Well this question or variations of it (such as does anybody really make money in trading) is one that I am constantly being asked by traders who have been plugging away trying to trade for several years but with no real success.
It is a good question and one that needs to be asked. For instance In these modern times with high-frequency trading and so forth is it even possible for a home-based trader using necessarily simple systems to make money in the markets or did that boat sail five or ten years ago and we are all now wasting our time.
Those that follow me will know I primarily trade fully automated computerised trading systems. The advantage of these systems is that you can program up the system rules and then asked a computer to tell you how much money you would have made over any selected test period. This takes the guesswork out of trading. Rather than have to rely on a vendor saying “take my word for it governor this is a real sound runner” you simply ask to see the trading results and can judge for yourself.
Here is a simple forex system that I sell – so it isn’t a hypothetical system that you can never get your hands on – you just ring me up – buy it -and it is yours to trade with.
The reason I selected it is that it really is one of the simplest systems I have come across. Here is the code for the long entries
The short entries are an exact mirror image and then all we have is some very standard exits and stops.
You do not really need to understand the code save to notice that it is very short and uncomplicated however the first blanked out section is saying if value 1 is less than value 2 (value 1 and 2 could for instance refer to yesterdays close or open etc) we may want to trade and then the second section is saying if value 9 is greater than value9 of three bars ago then we also may want to trade. When these two conditions are met we buy at the market on the next bar. We sell short using mirror images of the exact same code.
Exits as I say are the standard stop losses, profit targets and trailing stops that you would expect in any system.
So this is very very simple indeed and you do not have yards and yards of code and all sorts of subjective decisions to make. Each bar the computer calculates the four values and makes a decision for you whether you need to enter the trade or not.
So what sort of results can you get from trading a gloriously simple method like this in today’s modern markets.
AUD/USD – January 2008 to June 2015
Well above are the results for trading the Australian Dollar / US Dollar since around 2008. The graph shows the cumulative profits earned over that approximate seven-year period. Doing that period the system took over 700 trades and made close to $50,000 trading just a one lot !
If we put some very simple position sizing in the graph could easily demonstrate $500,000 profit over the same period. The absolute sums that you make are all down to your position sizing. However before you can do that you need a system with a positive expectancy. A system that makes you money and makes you money in as painless a fashion as possible. This is demonstrated by the smoothness of the graph. If the graph is very smooth then money is being made in a relatively painless way with few substantial draw downs whilst if the graph is very choppy then it is a different story. This graph is smooth and consistent over the full seven-year period indicating that is consistently been making money day in day out year in year out and that individual losses have been relatively small. This makes it an easy system to trade and a great system for applying more aggressive position sizing techniques.
In the graph below are the results for trading it on the Euro /US dollar. This time it is made nearly $60,000 albeit over a slightly longer period. Again the graph is relatively smooth and consistently moving upwards which is exactly what we want to see.
EUR/USD – June 2006 to June 2015
Incidentally a simple variation of this system also works well on the stock index futures Russell 2000 market. So not only is this system very profitable on Forex it can also be applied to indexes. This is a very good indication of the reliability and robustness of the method.
The point of the article ? Well you have seen how simple the rules are and you have seen the results it generates and it is a system that you can actually buy today.
So the answer to the original question is yes we can absolutely make money in the markets from trading very simple methods indeed. home-based traders can compete with the institutional traders if they approach trading in the right way.
Whether you buy a system from me or attend one of my training courses you will learn what techniques work, why they work and how they can be applied to the market. All of my courses include some mechanical trading systems such as the one above which provide absolute proof that the techniques work.
How much time and money are you wasting or have you wasted trying to design your own trading systems or buying in unproven and untested methods only to find that they do not work and more importantly cannot work.
That really is not the way you will achieve trading success you can waste thousands of dollars and hundreds of hours in misdirected efforts.
The key to trading success is to find people that can prove that they make money trading who also provide you with proven evidence based methods with long-term histories that you can properly verify.
If you do it this way your chances of succeeding in trading are improved by orders of magnitude otherwise novice traders are simply wandering around a darkened room not really knowing what they are doing or why they are doing it and just bumping into one obstacle after another until they run out of energy or money. It does not need to be like that.
If you would like to see short videos on some of my system that are currently for sale then follow these links
http://www.screencast.com/t/YJ0m6mV9 – 1 system in detail
http://www.screencast.com/t/a6IrK0L2 – 10 systems overview