Stale Trading Systems

"The markets adapt
to the systems traded in them."

A brand new system idea is produced and does well in the markets. As time progresses, the system does less well and then there are claims that the markets are getting used to it.

From past experience there appears to be little doubt that markets do adjust to systems, which gradually lose their edge.

For this reason, professional traders keep a close watch on how their trades perform and are always trying to find ways to improve their systems.

The markets are massive and have no spokesperson who can be asked about trading matters. But somehow, as a biomass they find ways of resisting any sustained attempt to outwit them.

It is not possible to prove that markets get to know systems but it is thought to be so.

Like in all other walks of life, a lot of commodity traders are superstitious. Some must have unique systems that they will not reveal to anyone. Others feel they have to alter their systems very regularly.

Most traders would agree that over time, systems go stale and perform less well - and they put this down to the markets 'getting used to them'. That is one of the reasons why they spend a large proportion of their trading effort looking for improvements - in order to remain 'up to date'.

It is not difficult to produce your own system rules and any traders who have not done so are advised to try, as it is an efficient way of improving systems.

If you develop this skill, you will be less concerned about the markets getting used to your system.

Traders should always be open-minded towards any suggestions for improvement and prepared to investigate their worth. Having the right methods and software is essential - as this makes evaluation of new ideas an interesting and straightforward task.

Remember that improvements should never involve curve fitting. Rules should be as few as possible, apply generally and be non-discriminating between time periods and markets.

 

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Copyright David Bromley 2006
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