Thursday, February 12, 2009


jguy3348: I am here..Been cruising and found old you on wrote some really good stuff there. I got alot of questions. Earlier on this blog you talked about probilities. I don't want to recap all you wrote. Do you still use proabilitiy and backtesting for system developement. Can you give an example of what you might look at use to measure probability?? eg, is consolidation a probality factor? Doo you have more thatn one probability factor? You also talked alot about backtesting!!!! Do you do this by hand or do you use software....I am not sure if I have been clear or not , please excuse me if I am confusing you with my question..

Hi Jguy if i wrote really good stuff on moneytec does that mean i write total bollocks on here? LOL

anyway, lets talk about backtesting and systems.

Im only going to say this once and it might upset a lot of people. My experience has shown that backtesting is a total waste of time ... almost. It's also learned me that systems don't work long enough in 'retail land' for anyone to make a lot of money or a reliable income.

Take a look at the grail blog and you will see that we spent a massive amout of time working on backtesting, system development etc - sure, i did over 1000% inside 13 months so you could say that was a success. I made some good money out of grail but then the system failed.

I was lucky for a whole year - if i'd have discovered grail two years earlier I would now be in the leagues of the super rich because in total grail worked day in day out for four years.

However, it wouldnt have been possible to identify the grail pattern until it was at least two years old so the maximum we could have milked it for was about two and a half years.

The team and I sat up night after night crunching numbers spending literally thousands of hours between us backtesting various stuff. it was a waste oif time.

The initial backtest which gave us a ball park system was good enough.

at the end on 2006 came the black swan, as happens in any mechanical system - eventually they always come to roost.

Systems are ok for a learning curve, but the biggest lesson anyone could take away from here is to learn to trade risk. One day if you last long enough you will understand what i mean - until you get there you'll think its about money management, or the entry, or the stop or this indicator / that indicator. It isn't it's all about risk.

next question will be something like "do you have a system soul" and my answer is yes and no - I have a chart setup and seven years of looking at them so i guess thats my system. Reading the charts is an art form, not a set of childish rules, go long when x=y, short when y=x, stake X% of pot etc - all that is BOLLOCKS.

Forget systems - either building them or buying them, forget backtesting completely, learn to trade risk and you can make money all your life.

Wanna know more? - click me

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