Let’s assume you received an email in your inbox this morning of a new forex system and when you went to the website the opening sales copy said something to the effect of:
I have 4 golden rules that I use to determine if a trading method is good for me:
1. It must be a complete method, with setup conditions, entry rules, initial stop loss rules, and exit strategy rules, leaving no decision to chance.
2. It must include specific risk management, money management, and portfolio management guidelines.
3. It must be based on technical analysis, but it must not be a 100% mechanical system.
4. It must take less than 20 minutes a day to apply after learning how to trade with it
Impressed so far? Would you continue reading the remainder of the copy?
Well I’d be impressed! I’d be a little niggly on the last two points as I wouldn’t care if a method took 20 minutes or 2 hours (obviously I’d prefer the lesser time). So what if the system is 100% mechanical, wouldn’t that be a good thing? Sure, all systems break down, we all know that the only thing guaranteed in life is change, so you not only need to have a method that works, but you need to have a process where you can adapt to changing conditions (i.e. how do you know a system no longer works? How do you then tweak it?).
But I found there was one even more important element that this person missed from their golden rules. Did you pick it up?
To see if the element I thought they missed in the opening pitch was going to be in the remainder of the copy I continued to read it and sure enough it wasn’t there! (Okay, so there was one testimonial where one customer claimed to have had 8 winners in a row – they could’ve all been 1 pip profits, or 1000 pip profits, we aren’t told.)
So what was the missing element?
Talk is cheap dear friends we all know that – and it’s even cheaper on the internet! The only evidence this copy provided was the website statistics on how many people viewed their site, and the expense at creating the high class videos that were used to create the DVD course. Both of which I have no doubt on.
But, so what?
Sure, your method may use non-technical methods, you may be counting how many pigeons poop on your Porsche every morning to determine whether to go long or short the Euro, but what has been that method’s results? And can they be verified by an independent third party?
Sure, past performance is not indicative of future returns, but they’re a good guide aren’t they? I mean, would you prefer to place money into an asset that loses money 20-30% every year? No? But past performance is not indicative of future returns, next year the asset might make money?? True, but something would need to change for this asset to make money because the probabilities from its previous history indicate otherwise.
And we know you don’t need a 100% mechanical system to be profitable.
You can be at the other end of the spectrum and have a 100% discretionary system, that’s fine. Run a demo account for a few months trading your plan (which is written down, yes?) and see how the results go.
As you’re trading write down things that you notice with why a trade was profitable or not:
- Did you trade the method exactly?
- Did you notice anything unusual prior to entry?
- Did you notice anything unusual about where your initial stop was?
- Did something unusual happen during the trade?
- How was your exit?
By analysing you and your trade afterwards you may begin to see a pattern develop with certain trades and find that when you tweak your method to compensate for this pattern your method improves immensely.
If you have no plan you have no method.
And if you have results but no plan you have no idea on what works and what doesn’t!? So if you’re trading a demo account but have no plan – STOP!
Then start by doing the following:
- Formulate a method. Find what indicators/fundamentals resonate with you, or look at some charts and see what patterns you notice. We’re all different here. I’m not a big fan of Elliott Wave, Gann, counting Uranus’ rings, or counting pigeon poop on my car, but for some of you those things will work the best (hopefully not the pigeon poop!). The best system for you is in you. All you need is time and experience to find it.
- Test your method. If you can get some historical data, and can write computer code then mechanically test it, if you can’t that’s fine, be sure to write your method down and demo trade it.
- Stick to your method for a set period of time/trades (at least 20 trades, but if you’re doing more than a trade a day I’d recommend trading for at least a month). To stay disciplined I recommend you exercise regularly or perhaps clean your house regularly (trust me your partner will love you for it – even if you don’t make money), because if you cannot stay disciplined in one small area of your life what makes you think you can do it in the hectic world of forex trading? Oh wait a minute you’re a “special case” and these rules don’t apply to you rrrright.
You don’t need a special top secret course to tell you what you already know on how to be profitable in the forex market. You just need to get off your lazy glutes and do the work yourself.
If success were easy everyone would have it – and what would special about it then?
So if you’re buying this course then I believe you do so on faith. Nothing indicates to me that the method even works, which means clients may be very disappointed at the actual results when they come to trade it. I have no doubt that this organisation will offer tremendous support, or help educate the customer on what the forex market is, but can’t all this be done for free from a popular forex forum??