HOLY GRAIL, THE PERFECT STRATEGY ...
We spend a lot of time trying to find and implement the “Perfect” trading strategy – one that gives us crystal clear signals, minimizes our draw downs and produces 100% winners. Naturally we want the most gain with the least pain. That’s why we jump from system to system. We have not yet accepted the reality that no perfect strategy or system exists. We are afraid to be wrong. We want perfection without risk. We spend a lot of time being angry at the market when we should be angry at ourselves.
If you are a systems trader, you can follow you rules to the absolute and still having a losing trade. That is our challenge. You will often hear of systems advertised that produce 80-90% winning trades. This assumes you are a machine that takes every signal, at all times of day, and follows the system rules without deviation. Really? Even the most disciplined of us can not reach these levels of perfection.
I am often criticized for taking trades that meet my criteria for a valid signal only to have a loss – especially if another trader copies my entry and targets and also incurs a loss. My system is quickly dismissed and/or condemned. I can not defend the fact that there are losses in trading and my system was designed for my level of expertise, so I fully accept the outcome of each trade. I will never apologize to all of the haters that expect to jump on the coattails of others and do not expect any losses.
It is your responsibility to develop and/or revise a system that will apply to your uniqueness. Furthermore and most importantly, it is also your responsibility to thoroughly test a system to confirm its performance and not take the word of any marketer or another trader.
The truth is that systems with a 50% winning rate (or less) and proper money management can produce staggering profits. The perfect system exists only in that it is a system that fits your personality and you can follow the rules consistently. That is as close to perfection as we can ever expect to achieve.
Regardless, we will continue to search, expecting someone else to solve the riddle we can only solve for ourselves; to develop a trading system or strategy that fits our individual criteria for our personality and our level of ability to execute it.
You will find certain things about certain systems appealing – whether it is the “look” of the system on a chart, the indicators, or the rules. That is all well and good. But, you must have realistic expectations, confirmed by the data you have obtained through back testing, before you can ever execute any system with any level of consistency.
The search for a system can be arduous, but searching without testing is futile. Until you accept losses and perform back testing, you will suffer the endless cycle of system jumping – confused, frustrated and lost. Pros and marketers are counting on it.
Make sure your search for perfection includes the process of back testing, a thorough understanding of the system rules, and adjustments for your level of experience and current trading state.
You will find that losses become nothing more than a very minor and acceptable inconvenience – not worth any anger, frustration or significant emotional investment.
"Trading is not JUST about numbers ... It is about the PROCESS behind the numbers"