I had previously inquired to see if my forex startgey i use now would " last forever". I got some mixed answer but i believe the overall answer was no. So my question now is, from the skills i have to devlope a sstrategy, will it work forever, like when the market has another major change, will my current skill to devlope a strategy continue to work or will i need to learn how to make new types of them? Thanks a bunch!
same boat dude, but there’s no such ‘last forever’ I think. the only thing last forever is the ‘change’ :), i try several trading plan, some at long period test and research other last much shorter. when you said “like when the market has another major change”, I think of market range change. said we’ve got TP level 50 pips daily target on GBPUSD pair, and then last year this pair average daily change shrink form 150 daily to 80 daily average, for this event shoud we adjust our take profit? or just keep with 50 pips ? well, it’s better to get along with the market it self, right ?
All I can say is that if you have developed a successful trading strategy once then you can do it again. I don’t think that you need to build from the ground up, rather adjust what you have but then again it depends on your strategy and how you have created it. Some things will never change.
Hello ‘Jay Boy’! Welcome to out threads!
There is an important distinction between ‘strategy’ and ‘system’ highlighted by my esteemed colleague,
FX-Honorary Woman PipNRoll, on the second entry of page 13 of my thread, here:
http://forums.babypips.com/forextown/56880-testing-new-system-13.html
I hope this helps you in defining the difference between the two terms…
I would say that system is something more than strategy, maybe first is aggregate of several seconds, including broker choice strategy, money management etc. For example frequent scalping with small volume is one system, meanwhile rare scalping (4-5 entries in a month) with bigger lots is other system…
based on those “page thirteen 2nd entry” :), literally said trading strategies simply part of our trading system. a trading strategies more likely an approach upon entries, while system are bigger picture contain anything related to our trading investment plan.
Nothing is “forever” and the forex market is ever-changing environment. Traders’ job is to be able to adopt their strategy to the current market.
If you are using and automated trading system you would need to re-optimize it every 3 months or so (depends what timeframe you are using)
Therefore it is very useful to have a basket of trading strategies trading different pairs etc… creating a trading system that is a good diversification.
I don’t know about forever, but I’m using past 2 years only 1 simple manual strategy. And it still works, but you should be very calm and don’t be greedy.
Well it depends on what your system is trying to exploit. If it is some recent price phenomenon or discrepancy which you have discovered and are building a plan around that then it likely will not last forever. It is probably just some temporary inefficiency.
However, if your system is built on solid market behaviour which has been shown to be true since the beginning of time then it is likely that your system will ‘last forver’. You may just need to tweak certain parameters now and then but the concept of your system shouldn’t change.
For example, it is well documented that markets expand and contract. They range and then explode into a trend. This kind of behaviour has existed forever. You can look at legendary old school traders like livermore who all understood the importance of riding a trend. Trends/ranges existed back then and they still exist now and they will likely exist forever. This is because of human herd mentality which never changes.
This is one of the reasons why trend following systems are some of the most popular and robust trading systems available. Its just that most new traders don’t like to use them because they have low win rates and you have to wait for a long time to catch a big trend and have the emotional discipline not to take profit immediately.
I’m slightly surprised.
I’d have guessed the consensus would be “There isn’t a way of predicting that”.
Some strategies are timeless - others are anything but. (This very long thread details a system which was very productive, for many people, for a long time, a few years ago, but it’s now stopped working to the extent that its creator and prime enthusiast has abandoned it, and explains why toward to the end of the thread. On the other hand, some methods, such as those explained in the books of Bob Volman, Al Brooks and Lance Beggs, ought to be timeless.)
I don’t quite understand the difference between this and your original question, but my own answer is “There isn’t a way of predicting that”.
If you can take a look at trading textbooks such as Van Tharp’s [I]Trade Your Way to Financial Freedom[/I] and Tushar Chande’s [I]Beyond Technical Analysis[/I], you’ll find very extensive discussions of this exact question, together with explanations of the parameters making systems more/less likely to be sustainable over the longer term.
Briefly, the more optimized (“backfitted” against previous data) your system is, and more degrees of freedom it has, the [U]less[/U] is the chance of it lasting successfully and reliably.