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

Trading Systems
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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.

1 Like
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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.

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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!

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You’re asking the right questions mate

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@samewise

If you always have momentum on your side, and you move up your trailing stops relatively quickly, you don’t have to know what market phase you are in and which strategy to use.

Your dilemma was also mine, and I came to the conclusion I needed a method, that if wrong limited my losses, better yet got me to break even.

But if right I could ride it for all its worth.

These days I don’t really give a damn what phase the market is in - my systems will get me out without too much damage if I am wrong.

What you are trying to do is provide certainty in a business with little.

I learned to work around the problem rather than solve it, which I believe cant be solved.

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So you mean some like MA’s paired with one or two other indicators, if I can eyeball a trend on the weekly and daily?

I’m looking at USDCAD right now on the daily and weekly and think it might fit the bill. At least in identifying the trend, which on the weekly is definitely up and on the daily, has been going up, but with some noticeable peaks and then a reversal.

Thanks for the specifics!

This stuff is great. Not vague and something I can research and look for more.

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The basic long-term trend of USD/CAD looks great right now -

  • the slope of the 50EMA is upwards
  • the 20EMA is above the 50 and both are above the 100
  • this week’s range so far overlaps only the previous 2 weeks consecutive with this one

You could add more parameters but the basics are strong enough to consider a trade. As for other indicators, I doubt they would show anything additional that would be worth the effort. Meanwhile the USD shows strong against other currencies in the major 8 and the CAD equally weak.

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Thanks for this! Really appreciate it. I think maybe I’ll wait a day to see what happens with this pair. Not confident enough to think I know what will happen. I drew some basic trend lines and I think price is right at the resistance one and might come back down.

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Sorry, I meant 20EMA not the 10.

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Yea, I have the 20, 50 100 and 200 showing.

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Hi Tommor
On my chart this week’s range also overlaps with the 16 Aug and 23 Aug weeks.
Also, 20EMA on the weekly is still below 50EMA.
Why is overlapping range important? I would have thought printing three consecutive green candies on a weekly chart would be a stronger indicator in favour of the uptrend.

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I only ever use daily MA’s, even if price is set to show weekly candles. So the idea is to get the same MA features across both D1 and W1 time-frame charts.

Yes, the current week overlaps with those two but not the previous two before it makes the overlap. so there is no continuous overlap longer than the current week plus the last two. The fewer recent consecutive weeks the current week overlaps with the better the price progression. This pair’s chart shows a total overlap of 3 (though caution needed as the current week is incomplete): looking at GBP/AUD, it also has made three weeks including the current with rising weekly closes, but the total overlap is 9 weeks no less. The conclusion would have to be that USD/CAD is rising with more urgency than GBP/AUD.

The general point though is not to find the absolute most precise parameter, it is to find a family of parameters which are good enough, and which allow trends to be differentiated and ranked. Simplest is best.

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I think this is a really good point for me. Find a family. Not one that is exactly right, exactly how it is describe. I get lost in looking for “exact-ness”.

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Hi Dear! Please I have read in your submission and realized that you use AI in trading as well.

Please could you help me have access to a trading robot sir?

Your response will be of great importance to me.

Thank you sir.

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Why a bot? I mean I think I know your answer, but why not share why you’re looking for one.