09 Feb The Best Way to Trade?
The Best Way to Trade?
Feb. 9, 2022
You know, buy-and-hold trading gets a bad rap.
I can’t even write that with a straight face.
Buying-and-hold has cost innocent (and not-so-innocent) traders billions of dollars, ruined countless lives, and nearly brought down our entire financial system.
Here’s a fun experiment. Try to find a horrifying financial crisis that wasn’t caused by someone buying-and-holding a toxic instrument. Let me know if you find it.
The Great Crash of 1929, the 2008 Meltdown, Long-Term Capital Management, the Dot-Com Crash, the Tulip Mania of 1637, and on and on.
Would these have happened if people quietly used a trading system that took profits and accepted stopouts? I think you know the answer.
So what is the best way to trade?
Follow-up question: how come everyone doesn’t think that trading systems are the best way to go?
It’s because systems break, right? People think buy-and-hold doesn’t break, even though it does. Catastrophically.
But trading systems eventually stop working, the story goes. Just like all systems stop working. Sure, Snickers has been the #1 candy bar for 50 years but their system has to fail at some point. And people liking Coca-Cola’s formula will stop working too.
Actually, those systems might keep working. But trading systems won’t? Why is that?
Because most trading systems are too short-term in nature. They’re sloppily designed to only fit the most recent market personality.
Sometimes that’s true, I suppose, especially if the system design was sloppy.
But do you know what’s not sloppy? Do you know what type of trading system never goes out of style?
Getting in on a universal principle and getting out when that universal principle goes the other way is guaranteed to be robust.
It doesn’t “fit” a market, it rides it. It only takes what the market gives. It’s there when the trends happen and slowly gets out when the trend is over.
No over-optimizing, no curve-fitting, no fraudulent backtests misrepresented in a Free Newsletter.
As long as we don’t get crazy on the entry by making it too specific or too complicated, we can’t really go wrong.
Here’s an example using the Master Trend robot on the GBPJPY 1-Hour chart: https://www.screencast.com/t/pWt4lA17Umr2
As you can see, it gets Long on a universal principle (break above a volatility band) and only gets out when it breaks below the band. At that moment, it reverses its position and immediately goes Short.
It’s always in the market doing what the market tells it to do. No tricks. No manipulations.
Did this sort of thing work during 2021 and 2022? Surely, the historic volatility of the past two years would screw something like this up.
Nope. This robust system thrived, making over $12,000 trading 1 hypothetical lot each time.
Using a stop-and-reverse system is robust and profitable.
From a mathematical and logical perspective, it’s the best way to trade.
But is it, though?
We’ll look deep into the details in our next Newsletter.
Get The Legend of Purple Valley: An Incredible Trading Journey here.
Get The Inevitability of Becoming Rich here.
To become an Elite Member go here.
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.