I know quite well that without a reliable trading strategy, it’s impossible to carry profit from the market. But the strategy that I developed spending six months gave me profit for next few months and then it got failure to show me the right direction. Why is so?
This seems to be a feature of many detailed TA-based strategies - they back-test well enough to go into use but their performance gradualy decays after months of profit. Worth noting that strategies often become poor performers on certain pairs but might be improving on others at exactly the same time. There will be nothing on the charts to highlight these times or pairs - you might only see it happening when it actually happens.
But basic principles underlying strategies don’t change -
trend-following trades = high win rate but slow gains on the winners
reversals trades = low win rate but dramatic gains on the winners
8 Likes
Could it be a basic pattern of human behaviour?
Some people, the more profits they get, the more wreckless they trade. They THINK they’re following their strategy, but maybe they’re not.
Then, when they tell their story, they say the strategy failed all of a sudden. How about backtesting the strategy on the recent failed trades. If the strategy works the same as it did during other backtests, then this tells you the strategy is fine, and the master you seek dwells within.
3 Likes
Reliable strategy making is a time-consuming matter because a strategy goes through several testing phases and once it passes, it is reliable.
It’s possible, we’re all subject to that temptation.
But cyclical good and bad performance seems to underlie all typical TA or mathematically based strategies. the compensation is that as performance cycles down on e.g. EUR/USD, it will be cycling up on something else, e.g. GBP/USD. There’s a kind of invisible equilibrium going on. I’m talking about classic TA-based strategies blending chart set-up, candlestick price action and indicators.
2 Likes
Sometimes it’s not about the strategy itself also but maybe more like a money management also. By saying money management, what I mean is the way you managing or exit your trades. First, think about the purpose of your trading strategy in a nut shell (trend pull back? reversal? breakout? range trade?). And then manage that trade accordingly until it no longer valid?
For example, let’s say you trade breakout, in my opinion, ideally speaking, once breakout happened, it shouldn’t retest back to the price I’ve entered otherwise it might becoming a false breakout. And it shouldn’t have a deep retrace either. It should take off smoothly without so much hurdles. This would be my ideal breakout. If the trade does not have these criteria once I’ve entered, I would protect myself to get out early via trail stop. I know that a breakout can retest around my price entry and then take off to my TP after that but this will become a mental bargain and it would be a very painful experience in my opinion.
2 Likes
I agree on deep retraces. I always find if I take a break-out and price doesn’t show urgent and continuous forward progress, that trade just isn’t going to work and it’s statistically wrong to hold on.
A trend-following position is different.
5 Likes
Market conditions are constantly changing. As the market changes, strategies must adapt accordingly. In the world we live in, nothing is fixed and humans inevitably make mistakes.
1 Like
Actually, price is constantly changing, and the context of price such as uptrends, downtrends and ranges is constantly changing but market conditions are not.
Well, maybe they are, and that could explain why good strategies decay over time and then recover over time. But if we can’t show any direct evidence of what causes this, we can’t say for sure it is changing market conditions.
4 Likes
Actually, speaking from what i know, it is not the right answer that you need now, it is the right question that you need now. it is not about developing a reliable trading strategy, it is about developing a reliable trading identity, to transform yourself into a reliable trader. and there is no holy grail or single reliable strategy, it all comes down to the person who is trading. in my earlier days, i used to trade in smc in the same region that other successful traders have put their trade in, yet they made profits but i did not though we took the same trade because i was not in control of my emotions, my risk management, thus i lost. i was not a reliable trader. so there are millions of strategies out there that can make you money if you are the right person. so how do you do that: trade in the live markets with little money, be aware of your emotions and how you react, journal. all you need is a 30% win rate strategy where if a hit a profit you make at least 4-5 times the amount of loss you make in a trade. at the end of the day you will be profitable if you are in control of your losses rather that your profits.
by TheWiz03
Market conditions and trends can change, affecting the effectiveness of a trading strategy over time. It’s crucial to continuously adapt and refine your strategy to stay aligned with evolving market dynamics. Periodic reassessment and adjustment can help sustain long-term success.
The first thing when developing a reliable trading strategy, but is often overlooked, is understanding yourself as a person.
For instance, if you’re an impatient person, you won’t have a future as a swing trader.
Trends are born and die because they are a reflection of price, which never stands still. But do you have any specific thoughts on market conditions?
I agree that a strategy’s effectiveness varies over time, but do you see anything in charts which might show market conditions changing? I do not.
1 Like
True, therefore if you have no patience or very little then best to be a scalper and practice take profit and not allow greed to take place in “any” of your trades then you may become a successful scalper, plus take it on the chin with a stop loss if trade turns on you as it’s all a game of percentages!
2 Likes