Creating Your Profitable Forex Trading System - Grand Forex Systems

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Creating Your Profitable Forex Trading System



I know it's probably a hard question for you, but if you have to pick one lesson or one concept that you really like to teach people, what would that be? Are you talking about in terms of psychology or terms of trading in general trading general? Anything that comes through my discipline because, first of all, the way I approach markets and I would highly recommend everybody else - do it is to find an idea. But it has to be an idea that can be tested, so it can't be an Elliott wave because nobody knows you can't backtest it. 

 So something like Donchian systems like channel breakouts. You can backtest them. Do they work? Do they not work, so test backtest once you've done that, now you have a proven system. Now all it takes. Is the discipline to follow that system right, follow it religiously? No matter, I don't care what you think. I don't care what your brother-in-law thinks. Just follow its discipline. Now the system is accountable, it's provable, it can be adapted, but you have to have the discipline to follow speaking of adapting your system. How would you make your system better? Let's say you do something, and it doesn't work as well as expected, and the result like close to 50x50. How would you make it better? What would you look at? It depends on what the problem is.



  


I look at most systems, and I'm basically a system type trader um. All my entries and exits or 99 of them come because of a system. Okay, like it crosses this, I buy okay, it depends on the problem. For example, um, one of the things I do with my coaching customers, for example, is that they'll go and they'll do a backtest, but every month we go through their actual trading performance. So you start to learn certain statistics. So the two basic statistics are: what's my percent reliability?
 

In other words, what percentage of my trades are winners to losers, and then the second one is: what's the ratio of my average winning trade to my average losing trade and then there's other statistics as well largest drawdown, etc., etc. Okay, the largest string of losers. So you look at that, and you start to say, well, if I'm making money on 55 of my trades and my average winner and my average loser are the same sizes, I got an edge in the market, but it's not a big edge. So now you have to attack. How do I make one or both of those statistics better? Generally speaking, if I can stay in the trade longer, my average winner ratio to average loser will get bigger. 


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PROFITABLE WINNING TRADES


Okay, that's why position trade systems? The average winner's got to be two-three times bigger than the average loser. For a short-term day trade or swing trade, you're going to have a 50x50, 55x45, 60x40 reliability. But if I can get my average winner from one equal to 1.2 or 1.5 times my average loser, then I have a big edge in the market. Do you see what I'm saying, so you have to start to attack, and there are different techniques to attack each of those statistics? So it's really about pinpointing the thing you want to work on or improve, and then finding out things around that correct, and once you do this, what would you do? Would you look at like ways to make it better based on your actual trading data, or would you kind of do when you back these environments figured out?

 What's the best thing to do whatever you've got? Obviously, your own personal trading would be the best data because it's your data, and it has to do with how you approach the market, but a lot of people, particularly if they're starting they can't do that, so they have to backtest. Let me give an example: a student came to me with a technique. It was profitable, um uh, not wildly profitable, but it was profitable, and so I said, well, okay, one of the things you can do is add a trend filter. So, in other words, I'm only going to take what he was taking, buys, and sells from now on. I'm only going to take buys if they're, if, like the 10-day moving average, is going up. 




Okay, so now there's a trend filter. It dramatically improves profitability because, if you trade in the direction of the trend, your ratio of the size of your average loss to your I'm sorry, the ratio of your average win to your average loss will always go up if you're trading. Only in the direction of the trend now you may end up actually making less money because you're cutting out half your trades. Still, nonetheless, you're going to be psychologically a lot better off because your average winner is much bigger than your average loser, and your percentage of Winners to losers will go up too if you put in a trend, filter, and most techniques work better if you add a trend filter to them funny.

You mentioned this because I found at least for me that, like the way I improve, my result is by removing trades like not adding trades, and people would like to add more trades trade more things. But for me, it's like reducing the number of trades by trading. Fewer pairs and filters with a star frame, things are sort, that's correct, usually reducing. I always tell people that I work very hard at not trading, not trying to find trades, but trying not to make trades. Talk me out of trades rather than talk myself into trades.