Is Simple the Best Way After All?

Is Simple the Best Way After All?

Mar. 13, 2023

The best answers are the simple answers.

Want to be the best tennis player in the city?

Hit the ball in.

But what about grips? What about equipment? What about fitness? What about style of play? What about…? What about…?

Just hit it in. Forget everything else and hit it in. Every time.

It works.

And it always will work.

In system development, the advice is similar.

Just find simple systems (that aren’t perfect) and fit them together to make a robust whole.

Because the systems are simple, none of them will be great on their own. That’s okay. That’s preferable even.

Their imperfection is what makes them work. Remember, if they lose, they’re not curve-fit. If they’re not curve-fit, they’re robust.

And if you fit a bunch of robust systems together, you get something really robust.

That’s the theory anyway.

But most people don’t do it. I haven’t done it.

How can a portfolio of simple, imperfect systems be better than a portfolio of really good systems? 

It doesn’t make sense.

Or maybe I’m too obtuse to see I’m missing the Holy Grail.

Last week, we talked about some simple Band breakout systems.

None of them were great on their own. They were okay, not great.

But what if I put those not-great systems together?

That’s what I wanted to find out.

So, I did some testing and, yes, some optimizing, and I came up with 4 different pairs that all used the Band breakout system.

Then I fit them all together with Portfolio Architect.

Here’s the Report of those four pairs since 2003 using 1 lot each time:

Here are the Annual Returns:

While 2023 has seen some early losses, every other year is hypothetically profitable.

All the imperfect systems fit together to form a hypothetically excellent portfolio.

That’s pretty crazy.

And we’ll talk about the individual currency pairs in the upcoming Newsletters.

Talk to you soon.

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.