I would like to share with all of the thread’s subscribers/readers to one good post about ‘Life of a trading system in a forex forum’. Most of the points posted by the author really hit the nail. Let me put a disclaimer, though I posted his post here doesn’t mean it reflects entirely what I agree or think or believe in. Read all of the points of the post and I will add some points at the end of his post/article.
It basically about the number of free forex trading system made available in any forex forum and how it can be popular for many weeks or months and suddenly the thread becomes dead.
[B][I]I became a member of the forum 7 years ago. As a beginner I spent most of the first 2 years studying various trading systems posted here, using some of them on demo accounts and (unfortunately) a few on my live account. Eventually I created two of my own which I still use with little modifications up to this day. However, the old hobby is not dead. I still test almost everything. Occasionally I find a new idea, an interesting indicator, even a good system that can be made profitable with some adjustments.
But the really fun part is to follow what happens to such systems over the months and years that follow the initial post. They have a life of their own and seem to follow the same path, over and over again. Hundreds of systems, thousands upon thousands of posters and posts … and nothing ever changes. To me their evolution is now more than predictable and I’m sure there are many others who have noticed the same patterns.
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Here’s my holy grail! The OP tells us a bit about himself, the rules of the system, some charts carefully chosen with entries/exits that worked great. He informs us that he’s been very successful using the system.
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The fan club is created! The first people who post are those who have a few winning trades using the rules originally posted. They become groupies and whatever happens in the future they will defend the system even when it’s obviously failing miserably.
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The newbies are here! People who know virtually nothing about trading, Metatrader or indicators start asking questions such as “where do I put the mq4 and tpl files?” … “how many lots should I enter?” … “what time is it here in <insert place> when London opens?” … “does this work without a stop loss?” and so on.
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You’re a legend Sir! Following the beautiful charts with a bunch of winning trades and the very wise answers given to the questions asked by the army of beginners the OP gains the unofficial title of super-trader. The number of posts grows exponentially. Everybody is happy, doubling the account is around the corner, and from there it’s just a matter of months until making it to Forbes.
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We need more indicators! Market conditions change and the system loses money a few days in a row. Clearly it has to be adjusted. How? By adding more indicators to filter out the bad trades. It’s very easy, isn’t it? Just add something that would have kept one out of the last losing trade. It doesn’t matter that the very same filter would also prevent one from taking many of the trades that turned out to be winners. Nobody bothers to backtest this. So … let’s add the stochastic … the 200 EMA … examine the higher time frame … check the daily range … put the Renko bars to smooth it … the TDI works best … I would add the Bollinger bands …
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The systemS are here! Since everybody is now euphorically adding indicators and rules we no longer have one system. We have anywhere from 3 to 10 versions of the system, some of which having in fact very little in common with the original rules.
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Chaos reigns supreme! With all those new additions and people posting like crazy charts and results using different setups nobody knows exactly what’s going on. The thread is full of requests like “can anyone point me to the latest official version of the system?”
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We need them robots! Now that we know how great the system is it’s time to ask some great coders to make an EA. Which version of the rules should he use? We can try a few … maybe one will work.
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Nah … dem robotz no good! The EA is losing because we humans can see and feel things about trading … it comes with experience. So let’s forget EA results, forget backtesting, and let’s just trust the thousands of pips reported by the groupies. The system must be good, no doubt!
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It’s just that little thing left to do! After a while, noticing that a large number of people posting in the thread get mixed or even bad results, someone has an epiphany. All we need to make the system really great is an indicator or something to tell us if the market is trending or ranging. But not yesterday or last week or last hour. What is it GOING to do next?
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It works for me! So we are left with the OP and his early followers claiming that the system works beautifully, they all make thousands of pips each week. We have a few others who claim that it’s losing big time and others get so-so results. And the vast majority still keeps trying to find that extra indicator that will make the system perfect.
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There’s a new kid in town! A few months later most people left the building. Even the OP most of the times. Nobody knows why. Have they become so incredibly rich that posting on FF is no longer interesting? Or maybe the system is not so good after all? But hey … who cares? Did you see that new system? That one is really great! [/I][/B]
Which phase Macfibo system is on in Babypips forum? No.3? No.4?
Like any trader in Internet age, forex forum is the first destination I went to in finding some useful system that I could copy, modify, test, traded etc etc. I believe it was around 2006 or 2007. I remembered number of systems that was so popular and many thought in few months, most of the traders will become millionaires or rich etc etc. Systems I could remember was like Sidus, Bagovino, Sonic System, Vegas system, SRDC, Rob Booker’s Arizona rule, Ttalmoi system etc…
They had a lot of followers, like what the author of the article stated in Phase 2. I was one of the them. Infact I was the one in phase 3.
Phase 5 happens… but after the systems harvested positive pips week in week out… then until ranging markets HIT the pairs traded and those 100 pips per wiin becomes 45 pips per loss… 1 loss, 2 loss, 3 loss, 4 losses, 5 losses… in a row. Then most people panicked/ had a kneejerk reaction and decided to TWEAK the system… only after one week or one month of BAD run. Now, I think I stated this weeks ago when Macfibo was having a little bit of dry spell? and urge new traders not to panic and one bad week or one bad month doesn’t make the system into a bad system.
Phase 5 is what i really fear will happen here in macfibo system forum thread… because phase 6 and phase 7 will definitely happen. Infact, I can guarantee it! I had ONE of my simpler system posted in one forum, it became a bit popular for a while until once the system hit 8 losses in a row… everybody panicked and claimed MARKET HAS CHANGED… we need to change it… we need to adapt. Chaos. People started to talk beyond the main essence of the system. For the betterment of other newbies, I ‘deleted’ the thread and I never look back. The few traders who stick to the system rule AND ones who tweaked but backtested in over 400-500 test trades, still use the system and only experienced very few rare negative months… but never broke their account.
Tweaking a system is not wrong. That isn’t what I m trying to say. But when you tweak a system only after the system suffers one week or one month of bad performance, is not ‘adapting’ but it is just pure PANIC. If the system suffers MONTHS of losses, YES… I agree you shoud tweak it but you can’t trade the new refined trading rule WITHOUT testing it thoroughly.
Several programmers/traders tried to code Macfibo, in attempt to make it automated. I never against it not I ever recommended it as well. This is just my personal preference, but I rather trade according to my own decisions… not robot. No matter how accurate the EA replicate the complete trading rules. Few days ago one generous trader wants to write the Macfibo EA for me, assuming for Free. But I still strongly believe that trading by our own is 100 times better because with it, you gain experience and experience is something you can’t buy from expensive or cheap mentorship programme. I never been a fan of automatic backtesting because you learn nothing from other than computer generated results, which you still not sure if the EA executes your trade as what your system say. Again, I am all with modernization with EAs but just be careful with it.
Phase 11… well, I will not say I have make millions after trading Macfibo over the years… but I have met 80-90% of my trading objective (I will keep it private)… my intention of starting this thread is to help new traders and perhaps asking for more ideas how to make it better… but as I’ve said several times… every idea is a good idea but until proven otherwise… like phase 9, people tend to forget to test their new ideas, new indicators. 100 test trades is not big enough to suggest an idea will work. (not that 200-500 trades will replicate it’s pattern in the future but it provides more solid proof than less than 100 trades).
Another thing that i want to try to say is I don’t want this thread to be dead in few months and I do not plan to abandon this thread as well. If this system’s thread can maintain to be active, I will be happy… and I am more than happy to continue post system updates and release more advanced versions of Macfibo as long as there is interest and Phase 5 doesnt happen. 