How can I tell if a system is right for the current market?

Other than losing trade after trade, how do you know whether one of the many systems shared here is right for the current market, right now?

Can a beginner really figure that out, or should I be looking for systems that say like use this when the market is ranging, or don’t use when the market is XYZ.

Very confused.

I love the thinking behind this question. Which is that there must be times when you should not take a trade because the probability of a successful outcome is already damaged before you even start.

Start with your parameters for identifying the simplest pattern - a trend. Once you have a panel of features you look for to firstly confirm a trend and secondly gauge it against other trends, then you can select the best trend to trade, either as a trend-following trade or a reversal trade. Note down what you would need to see in an ideal perfect uptrend, but keep it simple, just using a couple of time frames and a couple of MA’s. Make this into a check-list or score-sheet or spreadsheet and track the major forex pairs. If you can at least eliminate the weakest trend patterns, you will be a step ahead.

Same principles for every strategy. You must know what the ideal looks like so that you can identify how far off ideal is your actual situation.

2 Likes

Very hard question. I don’t have one answer, so let me just throw few thoughts/points:

  • There is no system to predict the future, so you never really know, if current market conditions will last long enough to profit from particular system.
  • Good systems should have some kind of filter to keep you out of unfriendly market phases.
  • Previous point implies, that you need to understand the system, what are moving parts and what is the role of each element and why they work together, to be able to assess when it works.
  • Beginner should stay with simple strategies, which require general conditions to look for edge - trading / ranging
  • For indicator systems you may not be even able to tell, if parameters are still valid until price becomes history. I tend to disregard strategies, which work only with specific parameters.
  • Manual price action trading requires you to use correct tools in correct conditions, which may be good idea for beginners. Double/triple tops/bottoms, range break with pullback, support/resistance - happens on each pair and in each timeframe - you “only” need to be picky about the quality of patterns / market structure
  • Most systems shared on forums are not profitable or require additional discretion. Do you research, backtesting and do not trust what you read :slight_smile: My approach is to convince myself, that given system does not work in long term and usually I manage to prove this with tens of systems presented on different forums.
  • Do not expect crazy results. Strategy needs to be only good enough to give longterm SLIGHT edge with set risk to reward and win rate. Win rate of 10% is good if you have high enough R:R and negative R:R may be good enough, if you have high winrate (eg. scalping). Strategies won’t work for some periods in the market and it is fine :slight_smile:

Hope this will have any value added for you :slight_smile: Cheers!