Items Tagged With Forex Trading System

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:

1. Trade Setup
2. Trade Rules
3. 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. 

There's a new forex article on Investopedia titled, "Inside Day Bollinger Band Turn Trade" by Jamie Saettele.  I don't know much about the author except that a lot of his articles involve trading systems.  It's a good read because it shows how simple it can be to develop a system that could potentially be your money maker.   I remember a Rob Booker seminar where he said that if you put yourself in a room long enough, you can make a trading system out of anything.  This is absolutely true.  The question is whether this system can be profitable or not.  That would all depend on your rules, expectations, money management and a whole lot of other things but it is possible.

Read the article at http://www.investopedia.com/articles/forex/06/BBInsideDay.asp

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? 

1. 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.
2. 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? 

1. 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.
2. 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. 
   
3. 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?
4. Just because this trading system works for them doesn't mean it will work for you.

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 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....