How long are trading systems efficient for and why?

The reason we are told this is so that you will believe what you just bought will become obsolete and soon you will need to pay out more money to buy a new model to do exactly the same job.

Don’t believe what you are told, just what you can prove.

I’m not sure about expiring. From what I’ve read, it seems like you just need to have a different system for different environments. So one for like a trending market for instance and maybe another for a slow/consolidating one. :woman_shrugging:

@tommor

That’s a valid point - one I hadn’t thought of.

The question has bothered me most of my ‘career’ although as of yet I don’t see much evidence of it happening.

After all if systems do have an ‘expiry date’ I would assume that trendlines, fib ratios, support resistance also become useless after a time.

I have never heard market participants saying that trendlines don’t work like they used to - not that I use them much anyway

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If a system will lose its efficiency and do not remain good for trading then it should be expired and we should more system or stragies to replace it.

Are you talking of a paid for service, if so then the system should be work in progress, in other words they host should be constantly improving the service to improve your chances of success.
I subscribe to my service around £270 annually, for this I’m entitled to upgrades and I can also attend 6 workshops a week, plus any technical support.
I’ve bought the system and subscribe to a separate service for charts and signals so maybe sometime in the future if I feel it can’t be improved on I may cease the subscription for upgrades etc.

Market doesn’t behave same way all the time. It reacts in a different way in different time. For a changing market like this you can’t use the same strategy. You have to change the strategy according to the changing market situation.

@StephanRichter

Hmm - not so sure - I use the same strategy regardless of market situation and it seems to be ok.

Of course I get losers but that can’t be helped.

And I agree that at times markets are more obliging than others.

But if as a mechanical system trader you had to keep changing things as you see fit you would really be holy grailing it in my opinion.

I am aware that certain moving average crossover type strategies were more effective in the past and now have lost there edge.

I hope though there never comes a time when break outs from tight ranges (coils, wedges, triangles, inside bars) lose their effectiveness

However it’s a very interesting topic to discuss.

Well iam a wyckoff-ian dude and iam big believer in big players, big institutions and big banks etc…
If a successful system got published and traders traded in the same way according to that system big players will eventually find a way to destroy and overcome that system to realize their profits and their targets
Take for example the london break out strategy as far as i know it was highly successful ,later on it fell out of favor as people realised how successful it was and started trading it and big players succeeded in overcoming it via different manipulations , stop loss hunting etc… , currently u will find many modifications for the strategy with modest success

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This is what I’ve always said, “If you find the holy grail, keep it to yourself!” Lol. However, if successful, experienced traders never shared their strategies here then this forum probably wouldn’t exist.

But systems like London breakout are pretty specific and focus on a certain time of day, so yes I do believe that could be easily manipulated…I have no idea if it has been or not. I don’t believe generic strategies such as using trend lines and SR levels will ever expire though, because they’re too subjective and are used any time, day or night.

If you randomly pull up a 4hr chart from 1955 and put it beside a chart from 2019, you probably would not be able to tell the difference, except for price.

Trading systems its like stocks when everyone start participate algorithms its not working its simple :smiley:

There is lots of quants who using deep learning and scientific aproach in pattern and factor recognition and for discretion trader there is very small opportunity to win in the sea with lots of sharks :sunglasses:

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@MattyMoney
indeed
Resistance and support levels reflects mostly human psychology/emotions including hope/greed/fear of prices going up or down plus major political decisions/pacts and treaty between governments/banks not to exceed certain price limits
So support and resistance lines would never expire unless humans evolved into aliens or so :joy:
I totally agree with u charts would look very similar
Of course sharing is caring , teaching the basics along with major tips and tricks to others is how most of us got taught - me included- and without babypips and others i wouldnt have learnt any thing , but the tweeks and the more fine details would be difficult to share because pros know if their profitable strategy went wild it will fail soon , imagine u own an industry based on some patent or invention u created-like intel chips for example , how far r u going to share the details of your mega-industry and reveal secrets to others ? Probably u wont , i myself wont​:speak_no_evil::speak_no_evil: i would share the major points not the details

@MattyMoney

Couldn’t agree more - if systems kept losing there effectiveness TA woud be pretty useless.

As you suggest the more specific the more chance of degradation in it’s success rate

However, I’m not too sure that there is some evil cabal ready to stomp out the effectiveness of a retail traders system

I think it’s more to do with changing market dynamics.

For instance high frequency trading has played a big part in the markets over the past few years.

Right now in the stock market we have the Robinhood effect where newbie stock traders are pushing up markets beyond past fundamental metrics - they don’t care at all if stock is overvalued in anyway.

Then there is the passive investment trend where there are now probably more ETFs than stocks.

This means all players are rushing for the exits at the same time causing problems in liquidity (this is going to be a major problem should we go into a stock bear market).

In the forex market these trends are not so easily to spot - but they are there too.

And over time they can affect buying and selling decisions that ultimately translates into certain specific systems not working.

I think it’s a traders job to keep on top of such market themes and not just be a brainless chart monkey - but these themes develop slowly so we will all be billionaires by the time all our systems stop working - lol

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@Johnscott31 System may remain same. But with changing market we need to change our approach towards the market. Also need to notice how price behave in changing market. While price in support or resistance, in trending market chance is there it will break, in range market break is not that obvious. Again it’s the understanding of market.

They lose their efficiency because markets are constantly changing. Old trading systems are no good in a newly evolved market scenario.

Do you have an example of what changes you’re talking about?

Let’s take the opposite perpective, can you show me a trackrecord of 5-10 years acheived with fibo or trendlines?
In general someone can show me a significant trackrecord acheived with the same ruleset?

Let’s consider something less discretionary than fibo or trendlines.
There are alot of combinations of indicators that make pips if you backtest on 2020, maybe a few will work also in 2021, the problem is that we dont’ know which.

I dont’ believe that everything expires, system that expires are the ones that produce the most actractive past results.
Often low return = high robustness.
It is a bit like music, classicals vs the hit of the summer.

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Exact, because 99% of movements are random, 1% (or less) is the inefficiency that traders/systems aim to trade.

@CavaliereVerde

Im sure that markets change and at the same time they stay the same.

To be honest, knowing the why and how is beyond my pay grade.

I think markets might change as they become more or less liquid - in highly liquid markets there are more participants willing to trade at all prices - not so with less liquid ones

It’s probably why such large moves in bitcoin - but as more money moves into it those moves will be less.

Also I do believe the HFT boys have had a lot to do with things.

Then there are other things like political and economic backdrop or market microstructure.

I’d love to get my hands on research as to why things change but it’s hardly easy to find.

If I was more of a quant maybe I could do it myself - maybe I’ll leave it to you?

All I really know is that markets have been breaking out from tight consolidations for a long time now - and until that changes I think I can still make money.

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Truth on both sides here. As a person who has been relentlessly working on building an automated trading system for years, I can tell you without doubt that varying market conditions are the death of trading systems. I have spent so many hours watching something that works in 2020 fail in 2006 and vice versa. The trick is finding patterns and triggers that work across varying market conditions and timeframes.

Everyone approaches this differently, but I like to build functions around indicator and oscillator checks that feed in external variable values. That lets you take several of those external variable values and run ranges of possibilities through thousands or millions of permutations using optimization passes against decades of tick data to find the needles in the haystack. MT4 lets you do this natively if you feed it good tick data. “Show me which trading hours vs. which MA period vs. which difference in value between the outermost 2nd deviation bollinger bands vs. which increase in pips for those bands during a single period returns the most profit across 15 years”… or anything you can imagine really. When I first fully grasped all the possibilities it made my head explode.

Don’t get me wrong, it’s not easy or common to succeed here, but IMO you can always build a better mouse trap, so why not stick yer brain to it! :grin:

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