qas30

--== It is Not Random But Designs ==--
Having trading discipline is the beginning; keeping discipline is the progress;
staying discipline is the success

Friday, April 04, 2025

The Search for the Holy Grail Trading System : Part 1 by David Samborsky

Published on Minggu, 10 April 2011 16.06 //

Most traders view the Holy Grail of trading systems as one that produces profitable trades 100 percent of the time. However, a trading system that produces profitable trades 100 percent is akin to being able to predict the future movements of the market. Since this is not practical under any circumstances this leads to the following statement which should always be emphasized :-

“Nothing and no one can predict the future movements of the markets.”


If anyone tells you otherwise then they are trying to mislead you. A lot of people using technical analysis often think that it is a substitute for crystal ball gazing. Some traders go to great efforts seeking the Holy Grail of indicators in order to outwit the markets: - I'm sorry to say there are none! However at best we can only talk in terms of probabilities and not absolutes. What we are looking for is a way of giving us a market edge so that the balance of probability is in our favor whether or not we are trading in unfavorable market conditions. This does not mean that we need to be concerned about exactly what trades will be profitable and what ones won't be. As long as the losses are constrained with good money management strategies what we can be assured of is that in the long run we can be trading with a reliably profitable and robust trading system that can be used across a broad market and one that will survive during periods of adverse movements in the market.

For those who are skeptical about using technical analysis to design a profitable trading system or one that works well in all market conditions across a broad market group you may want to reconsider your own philosophies regarding trading system design after reviewing the following trading system. I took an existing trading system out of the Metastock toolbox and modified it. In this case I took the Equis Bollinger Band Expert and modified it by replacing the BBand entry with a random entry strategy, which mimicked the outcome of tossing a coin. For example a trade was taken if you tossed a coin and the outcome was a head. The Equis BBand exit condition was not changed in anyway.

A true portfolio-trading simulator called TradeSim was used to back test the system in order to accurately model actual trading conditions. Metastock was used to generate trade data for the simulator and the simulator used this data to back test the system in a way that matched the way a trader would trade the system in real life according to a fixed set of trading rules and parameters that were not altered throughout the course of trading.

To generate the trade data a special Metastock Exploration was used to generate a trade database from a portfolio of securities that contained the top 200 stocks from the ASX. Note that some securities in the current ASX200 list may not have existed in the past in which case no trade data would have been produced before that time for that particular security. The resulting trade database was generated over a 16-year period starting from 1985 and spanning all of the way to July 2001. In this period over 3500 trading candidates were generated but not all of these trades are taken during any one trading simulation just as would be the case in real life. I also included an initial stop parameter based on the average true range which was used to generate position sizing for the risked based position size model that I used when simulating this trading system. No money management stop was used - the trade exit being totally dependent on the Equis BBand exit trigger. To make the trading system more realistic I included a 40-dollar total transaction cost and redefined the entry and exit triggers so that a trade was entered and exited on the day after the triggers at the worst possible prices in order to model the worst case slippage.

+ Discussion
Subscribe to our RSS Feed! Follow us on Facebook! Follow us on Twitter!
  • Basic Of Pairs  Correlations
    05/03/2013 - 2 Comments
    As a FX Trader, we have to know how the important of pairs Currency Correlation, why because we will know what is the best pair in our trade. Without Knowing it we'll stay at a pair without probability movements. As a forex trader, if you check several different currency pairs to find the trade setups,…
  • August, First Friday Intraday Trade
    02/08/2013 - 0 Comments
    August, First Friday Intraday Trade: TF kecil minta koreksi terbantu juga oleh Trigger News, so Not Bad lah..untuk Intraday bisa tidur lelap..selesai Trade, bobok...zzzzzz...zzzzzzzzzz.. Ada sahabat bilang "buat scalpingan bagus loh" , iya bro..Jika sdh ada dalam range2 tsb mah saya akan sangat hati2…
  • Trading value for money, not time.
    12/10/2013 - 2 Comments
    Trading your time for money is so common that it seems the only way to make money. We have been conditioned to believe this is the safest most respectable way to earn a living. Don’t you think your life would be much easier if you got paid while you were eating or sleeping? Don’t you think it’s safest to…
  • Perusahaan Investasi Emas GTI Syariah melarikan dana nasabah Rp.10 Trilyun
    11/03/2013 - 1 Comments
    Setelah banyak perusahaan-perusahaan Money Games, HYIP, Ponzi, ataupun Investasi Bodong lainnya bertumbangan, maka kini giliran perusahaan investasi emas GTI Syariah (PT Golden Traders Indonesia Syariah atau GTIS) milik Ong Han Cun seorang warga negara Malaysia, menyusul melarikan dana nasabahnya dan…