It’s very important that if you’re exploring forex trading or already trading that you have a trading system. One aspect of that trading system are the actual setup rules which usually contain entry and exit techniques. Traders put a lot of time and effort in developing these setup rules too often neglecting other aspects such as position sizing or relative size of your profits compared to losses. Therefore it’s important to find a comprehensive forex trading system.
Where can you find a comprehensive forex trading system? Throughout the last three years, I’ve been through many trading systems obtained mostly from books, forums, or other websites. I’ve found that almost every time, I’ll mold that system into something totally different than the original incarnation, something that fits my personality and style of trading. Many times, the original system will also need to be expanded to include things that were neglected or forgotten. Those of you searching for the perfect system may find this method of modifying existing forex trading systems desirable. There are places where you can find the whole package without any need for modification.
This brings me to the question, "where did you get your forex trading system?" I think there are four main ways of getting a trading system.
- Buy it. There are tons for sale out there on the net but heed caution. Many were just copied from forums, books, or other websites. Sometimes when you buy forex education, part of the package will include a trading system. For instance, Rob Booker provides his Arizona rules as part of his mentoring program.
- Get a free one. There are many free systems that can be found in books, forums, or other websites. I guess one can question whether a system found is a book is free since you paid for the book.
- Create an original system yourself. My main trading system is an original creation. There may be other systems out there that are similar to it since it’s a culmination of years of exposure to other systems and experiences.
- Modify someone else’s system and make it your own. As I stated above, I have done this many times.
I’ve created a poll that asks you this question here. http://www.forexproject.com/forex-polls/
This is a question I receive often and unfortunately I can no longer give an honest answer which is the only answer that I ever want to give. This is due to the fact that I haven’t dedicated myself to Rob Booker’s training since 2006 making my experiences outdated. The good news is that over the coming months, I will be able to give you an honest opinion because I am in the initial phases of giving his tutelage another go. This is possible because he has no expiration date on his training. According to his training contract, "You have as long as you need. You never have to pay me anything again…."
At first glance, there have been many changes to his training. His chart school, which are Rob’s trade ideas for students in video format appear to be more interactive. He provides a web conferencing platform where any of his students can attend and ask questions via messenging or voice. Other basic course materials seem unchanged such as the course introduction, FX basics, backtesting, support and resistance, moving averages, and similar topics. These are really basic though and I don’t see any reason why these would ever change. The course materials are also for the totally inexperienced forex trader, someone who has really never explored Forex outside of this course.
His primary trading system which has many components to it is called the Arizona Rules. He was just developing this system back when I lost interest in his training so I haven’t really explored it. If anything, it seems like Rob’s attempt is to provide his students with a well tested and possibly profitable trading system while also providing a comprehensive trading plan and system that one can take knowledge from to develop their own forex trading system.
I’m just getting involved again so I cannot comment further at this time but keep checking back here in the upcoming days and weeks for more details on Rob Booker Training. You can also read my previous and new experiences at http://www.forexproject.com/category/rob-booker-training/.
This is where I will put all information pertaining to my production trading system called the h-system. I won’t give the specific details of this trading system NOT because I don’t want to share but mostly because I don’t feel like giving it out will be of any help to anyone for the following reasons:
- It is important for everyone to create a system that fits their personality and trading style. I’m not a successful trader yet but I’ve heard that doing so can lead one closer to success.
- I don’t want to feel responsible for someone using this system and then losing money because of it.
- I am using real money to trade this system and I’ve spent a lot of time backtesting and forward testing. Since I just started trading it for real, I still don’t feel confident that this system will be a success (see #2)
What I will say is that this system has very simple rules. It uses technical analysis but nothing that anyone hasn’t heard of. Here are the rules I will state:
- Trade the GBP/USD only
- Trade using the 30min chart
- Trade during the hours of 2am EST and 11am EST only
- Always enter with 3 lots at the same entry price (unless slippage occurs)
- Always exit 2 lots after 30 pip profit each (60 pip total)
- Once the 3rd lot reaches 30 pip profit, trail the stop using the last candle high (if in a short position) or the last candle low (if in a long position)
- Place stop loss at the 34 low EMA for all 3 long positions on entry and place stop loss at the 34 high EMA for all 3 short positions on entry. Adjust the stop loss every 30 minutes if the 34 EMA high or low has changed.
- If trade was opened right before a hot zone (economic announcement), get rid of the stop loss and use a mental stop. If 1 minute after the economic announcement the price is below the stop loss in a long trade or above the stop loss in a short trade, exit. This rule is to allow the emotion to clear before exiting a position that may reverse.
- DO NOT TRADE DURING MAJOR ECONOMIC RELEASES. (RED RELEASES FROM Forex Factory)
The entry is just on price with only 1 confirming indicator. I’m looking into using an additional indicator for confirmation but as of yet, it hasn’t proved to be useful.
|Month||Pip P/L||Gross P/L||Total # of Trades||Total Winning Trades||Total Losing Trades||Total Even Trades||Avg. Winning pips||Avg. Losing pips|
I've decided to get back to some of the things I used to do which was reviewing trading systems and websites. The first system I've decided to review comes from a website that has decent traffic rankings (#49 on forexontop.com). I figured if there are a lot of visitors going there, there's a good chance he's selling his system. Therefore it makes a good candidate for a review. The system, called the Combo Profit System is provided by a trader named David Chia. David was gracious enough to send me a free copy of everything he offers on his site. This includes the following which would have cost $97:
- E-book detailing the Combo Profit System
- E-book Forex Online Manual
- Meta Expert Advisor of the Combo Profit System
- Free Membership to FX Nation
- Four Self-Help Books
- Three Trading Videos
- E-book detailing Penny Stock Trading System
- More bonus E-books
Some of the things David mentions on his site, http://www.profitguideforex.com are that the system doesn't require any trading experience, you can create your own trading signals, it will require very little time, it's easy to understand and easy to use, is step-by-step and can potentially make tens of thousands of dollars a month. This offer is risk-free according to the website in which you can try the system with an 8-week 100% money-back guarantee. Since I got it for free, I can't verify the fact that's it's risk-free.
As you can see above of what's included, there's a lot of reading material. I wasn't interested in any of the e-books except for the one detailing his system. I did look over the other e-books and they contain general information on the forex market, fundamental analysis, technical analysis, risks, and fibonacci analysis. This is all stuff I've seen everywhere on the internet for free. That's fine, according to the website, this is all "bonus" material.
David's E-book detailing his system was split into three sections, the first being an introduction. In the introduction, he explains candlesticks, chart patterns, pivot points, and technical indicators. It's a sufficient overview but nothing exclusive that you can't find elsewhere for free. The second section mentions money management and trading psychology. He explains stop losses, moving stops, and winning trader psychology. Nothing exclusive here either. There's also nothing explicit about position sizing in here and only six pages to explain the most important topic to beginner traders, how to control risk. The last section details his combo trade system which uses a combination of moving averages, technical indicators, candlesticks, and fibonacci projection. I was surprised at what I found. This system is targeted at people who have no trading experience yet it requires discretionary trading based on determining trends from higher time frames, candlestick analysis, fibonacci projections, fibonacci retracements and chart patterns. These are all subjects that someone off the street that's never traded forex before would have a hard time digesting. As far as being a step-by-step system, it includes:
- Trade Setup
- Trade Rules
- Stop Loss
He satisfies this claim to a certain extent. Is the system easy to understand and easy to use? Not really. I didn't have a hard time understanding it but a beginner might. There's also only two graphic examples and he just shows the absolute best case scenario for the trade. This bothers me. Why not show examples of outcomes that aren't expected. Overall, there is nothing groundbreaking or new in this combo system. I've seen this a thousand times on free websites and forums.
David also offers a free Metatrader expert advisor that contains an EA and a bunch of technical indicators. There are no real instructions or documentation that explain the indicators included or even how a beginner can use the EA. I gave David the opportunity to provide any additional instructions but he questioned if I was who I said I was (Rich from Forex Project) and wondered how I didn't know how to use an EA. I know how to use an EA but someone who buys the system sure won't.
For $97 dollars, you get a whole lot of quantity, way over 1000 pages of reading material, but not a lot of quality. I'm not going to label this a scam but it's not worth $97. You can buy a forex book for less that gives you much, much, more. In my opinion, there wasn't a lot put into this except a goal of making a quick buck. This is merely a package of e-books and information that you can find on the internet for free.
I appreciate David providing this to me for free. He did so with nothing to hide. I requested the same from the Forex Killer (http://www.forex-killer.com) authors twice and never even received an email back.
I've managed to pick myself up from last month's disaster and gained a little confidence today after both my h-system and reversal trades profited 60 pips total. I was able to jump on and off for the downward momentum in the European session and then jump back on and off for the upward momentum during the US session. I'm currently up 36 pips or a return of investment (ROI) of 5.4% for the month of March. I've decided to take Ed Mamula's advice on calculating profits for reporting my progress here. If you want to check out Ed's post titled, "Pips vs. Percentages Part 2" you can do so by browsing to http://edmamula.com/2007/03/09/pips-vs-percentages-part-2/
I've started my trading reorganization plan by rewriting the rules for the two GBP/USD trading systems I use. I've also redone the trade tracking spreadsheets I use to store more detail. I realize that I need to keep more detailed records regarding my trading systems so that they can continually be optimized.
As for all of the other technical analysis I wanted to learn more about specifically fibonacci, chart patterns, and carry trades, I'm not going to pressure myself to look into learning these any further at this point in time. I received a comment from Motu of Auckland, New Zealand who got my mind back on keeping it simple:
I think we're all guilty of thinking if we knew more it would make us
better traders. But IMO that is a dead end road. Some really successful
traders use very simple stuff. Have a read of "The Logical
Trader" by Mark Fisher…his ACD system is a nice blend of statistics
and discretion…plus he still uses it (see thelogicaltrader.net for a
book excerpt) – and it is very simple to use. Alternatively, Phil McGrew's stuff really works….and I'm certain Phil is the real deal in terms of trading himself.You
mention "it's strange that I spend so much time optimizing and
organizing this website but I don't translate this over to my forex
trading and studies."The reason for this IMHO is that site
maintenance it is not as stressful as trading! On the other hand,
trading profitably is incredibly boring…or should be. I think many of
us would be better off leaving our money in a portfolio of carefully
I am going to continue reading Nicole Elliot's book on Ichimoku which I could possibly use for position trading the USD/JPY in the future.
I was busy this weekend doing backtesting. I focused primarily on backtesting the H-system to improve on its performance. I was able to obtain much better results by letting the third lot position run which is pretty much what I thought even before backtesting. I was also able to obtain better results by using a breakeven stop. My initial stop-loss is always set to 30 pips and I found that moving the stop-loss to breakeven when the position was up 25 pips was optimal. I know this is only 5 pips from the target but nevertheless, this produced better results than without a breakeven stop or with a breakeven stop lower than 25 pips. The GBP/USD is a mover and it needs some room to move. From my experience, it's tough to find profitability with a stop lower than 30 pips.
In the process of coding the backtesting of the H-system, I created a new system that is basically a derivative of the H-system. This new system isn't difficult to backtest manually so I did it for 2 years but I decided to automate it too just in case I made human errors. The results from manually and automatically testing were very similar. This new system is actually more profitable than the H-system on paper. Like I said over the weekend, I don't want to jump to any final conclusions but by developing a standard backtesting infrastructure, the mistakes that I may have encountered before are lessened. Therefore, I'm pretty confident with the results. Now it's time to forward test this new strategy. My weakness or possible downfall may be my willingness to forward test with real money. I decided to do this with this new system today, profiting 21 pips on 1 lot. Here is the equity curve of my newest system from January 2005 to present making the assumption that I'm starting with $10,000. The label "Profit in USD" in the graph below is wrong. It should read, "Equity in USD."
I've already did but should you buy a forex trading system?
I have to admit that I was guilty of buying a trading system when I first started trading over a year ago. I bought the Alba system that's offered by the Pippin Ain't Easy site, which I believe is affiliated with Baby Pips. I never used it. But I cannot say I didn't learn anything from it. I learned that you can last longer in this business if you follow a system with rules. They can include both systematic or discretionary rules. I said you can last longer; I didn't say you could be successful. I wouldn't know anything about success because I haven't been trading Forex long enough to qualify for this title. I'm going to tell you what I think is the #1 way to last as long as possible until you can gain the experience needed that may or may not guarantee success….
Do not trade on impulse. That's it. I have traded on impulse in the past and it is a great way to give your money away in a heartbeat. You'll find that one impulse trade can quickly lead to another and another; literally a snowball effect. I no longer trade on impulse because I have restraint. I know that if I ever do impulse trade again, it could be an end to the Forex project.
Let me give you two reasons why you might want to buy a forex trading system?
- If additional education comes with this system that guides you in constructing your own trading system, then it may be worth it. Some mentors will give you explicit trading system rules but will assist you in molding it to your personality.
- You can learn something from this system that you never thought about. Someone who sells forex trading systems recently sent me their's for free. They were attempting to post a comment on the site that really just advertised their system which I would never approve. I kindly asked them for it for free so that I can take a look at it. I told them that if I found it at all educational, I would state that in one of my posts. Surprisingly I did find something interesting in it that I never thought about. This may not be useful to me now but it is yet another piece of information that I might be able to construct into something useful in the future. I'm not sure that this piece of information though was worth what they were selling the system for.
Why shouldn't you buy a forex trading system?
- There are so many free trading systems out there. These systems are supported and tried by many other traders who share their success or failure with it on forums.
- You can create your own. It isn't easy finding a system with an edge. I still don't think I have a system with an edge to make it but I'm always searching. In addition, if you created it, you'll trust it more than any other system and you'll learn to live with the results win or lose.
- This system isn't customized to your personality or needs. If this system traded strictly during the European session and you're asleep during this time, how will you ever find the time to trade it?
- Just because this trading system works for them doesn't mean it will work for you.
So I can't tell you that you should or shouldn't buy a trading system. If you do buy a trading system and it helps you further your education as a trader then it was worth it. I would tell you to be careful with what you pay for because everyone and their mother is selling a system with testimonials of huge profits.
I decided this weekend that backtesting with 1-minute data just wasn't
accurate enough for backtesting daytrading strategies so I went out to
Gain Capital's site, http://ratedata.gaincapital.com
and grabbed 5 years worth of tic data for the GBP/USD. It took hours
upon hours of grabbing the CSV data, inserting into the database and
then modifying my backtesting scripts but tic data is going to give me
the most accurate results possible.
Unfortunately the results obtained were disappointing and the H-system
failed to show anything but a tiny profit over the last 5 years. This
pretty much throws a huge wrench into the only strategy I've been using
over the last month or so. I don't know how others feel about this but should I be making a decision to shut
this system down? It has been profitable since I started trading it but based on the backtesting results, this would be nothing but a waste of time to trade. I know that past results don't always translate into future results but the whole point of backtesting is to find a system that has past results that are favorable. This would mean going back to the drawing board. If anything, the results instill less confidence and trust in me and this alone can create problems when trading. The most disconcerting thing about all of this is the confusion that it causes and the feeling that I have to start over again. I guess this is all part of trading which isn't supposed to be easy. I don't always ask for advice explicitely, but I sure could use some on this one….
Here are some helpful visitor comments received in the last 24 hours.
The first relates to the confusion regarding bid and ask prices experienced by beginner traders.
Posted by Nik
"This is the line I used to use when I first started."
"Buy the ASK , Sell the BID"
The second is an observation regarding trading systems offered by others and backtesting.
Posted by Dropout
Anyone offering a new system should be able–at minimum–to say that
they've manually backtested it for at least a year's worth of data,
resulting in "x" number of winning trades and "y" losing trades, for a
profit of "z."
99.9% of the time, experts selling systems, and those posting their
systems on message boards, say, basically, "Here's a system I've been
fooling around with. I looked back at a few trades I could have made
with it, and it looks really good." Then, they and others who follow
their advice start trading the system with live accounts.
As you can probably tell from my tone, I think this is a bad idea.
I received the following post from a user this evening and I didn't know if this was legit or not. Sorry but I get bombarded with crap on a daily basis. The mentor he mentions below is Phil McGrew who developed the McDot system. He does have videos on his site that you would find beneficial. Thanks for the taking the time to post David.
After paying good money (and learning little more than is available online) from an online forex "mentor" I realized I lacked a robust, well-tested system (this mentor's systems changed every 6 months). I wanted a real mentor (a system designer who trades full time for a living rather than one who does seminars/online teaching full time) and I wanted an online community filled with traders who trade one system and offer support, trade journal critiques & post testing results. Check out: http://www.currensys.com/ See the videos. The guy who is behind the system & the site is humble & doesn't advertise. So I'll do it for him because he's a wonderful guy and has a fabulous product:) -david (just another trader)