SCOTT WELSH TRADING BLOG

Would You Trade This Winning System?

Would You Trade This Winning System?

Dec. 11, 2019

This topic has cost me a lot of money.

Possibly thousands and thousands of dollars.

So, I need your help.

I’m going to present the general outlines of a very successful system, and I want to know if you would trade it live.

Because I don’t think I would.

And I think that makes me an idiot.

First, this is a real system. It’s sold by an excellent internet marketer/trader.

It has an myfxbook account that reportedly has been trading this system successfully for years. It’s as verified as verified can get.

The system makes sense on its own and the creator of this system uses aggressive money management to capitalize on winning streaks.

Here are the general rules to how it trades.

  1. If price is above a long-term moving average, Long trades are taken. The opposite is true for Short trades.
  2. When price moves far away from the moving average, we look to get in on a pull-back.
  3. For Long trades, if price is far away from the moving average AND we get a bearish bar, we enter. Opposite is true for Short trades.
  4. Target is in the 100-300 pip range and stoploss is in the 100-300 pip range. In other words, big targets and big stops.
  5. It trades 24 hours a day on the 15M chart and it only trades one specific currency pair.
  6. As it goes on winning streaks, the trade size is increased.

The exact details aren’t the important part. The conundrum is the important part.

Here’s the conundrum.

Since November 2016, this system has returned 1,352%. I’m not sure what leverage was available but this is phenomenal by any metric.

Here’s the thing.

I tested this system myself. The results since 2016 test out just like the results say they do.

But, from 2008-2014, this same system was negative.

It didn’t make a cent. In fact, it lost over $17,000 trading 0.1 lots.

On one hand, it’s made 1,300% for the past three years (which equals about $17k).

On the other hand, if you had traded it for a 7-year period prior to this run-up, you would have lost $17k.

See the dilemma?

If you looked at the backtesting prior to turning it on in 2016, you might have been too scared to turn it on.

And missed 1,300%.

But if it lost money for 7 years, couldn’t it start losing again any minute now? Is that past losing period irrelevant now?

Like I said, this is the type of problem that would cost me money.

I never would have been able to turn it on with that much negative backtesting. I just couldn’t do it.

But the question is: What would you do?

We’ll look at another tough question in our next email.

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.