Day Trading System

I am often asked about day trading systems. Generally exactly what I’m referring to are stock index systems (E-minis & & S&P s etc). I do not have much favorable to say about these types of methods. I do not think I am being unfairly biased; I’ve invested over 15 years investigating all kinds of trading systems.

Day trading appears to please the want for action and enjoyment in numerous traders. Often I think these traders are not looking to generate income however keep constant adrenaline pumping through their body! From my perspective, I can not think of even one day trading system from five years ago that is still doing today, that is right NOT ONE! Maybe a few have had occasional “& ldquo; return & rdquo; periods, however I m discussing 5 years of strong performance. A well respected trading system designer who developed some popular short term index trading systems has supposedly informed a few of his clients that even he thinks they only stand for 2 or 3 years at finest (he’s currently got rid of one from his offering and slashed the cost on another). Frequently, the day trading systems that still look excellent hypothetically are not reasonably factoring in slippage and commission costs that consume up performance. I’ve seen’some vendor s factor in no slippage! When extraing sensible slippage the systems go from looking fantastic to looking bad.

It is logical that nowadays trading systems might break down. The exact same thing that can trigger them to look so compelling coincides thing that breaks them down.


When working with one market (S&P s) or sector, it becomes simple to “& ldquo; optimize & rdquo; efficiency. Traders can & ldquo; force & rdquo; the computer to show them phenomenal performance just from pure curve-fitting of that past data on that one market or sector, however when dependant on the marketplace qualities of simply that one market or one sector what’s going to take place when that market sector modifications? It reminds me of the study that revealed that the drop in the S&P in 1987 must have only been a when in a several hundred year event based upon the existing data, yet it happened in the first couple of years of the index trading! Markets change constantly and traders need durable systems.

On the various other side of the spectrum, let’s look at trend following techniques.
They are not almost as “& ldquo; attractive & rdquo; as day trading. Traders could undergo extended drawdowns or flat periods prior to making money, but consider this; Richard Donchain developed some basic trend following rules promoted back in the 1960′& prime; s. Those approaches still work today, more than 30 years later on!

I’m not saying I would trade those Donchain methods now. I think there are far much better reward-to-risk systems and strategies offered (such as ours), But it strikes me as significant that longer-term trend following approaches made popular in the 60′& prime; s still work today. Yet, I can not think of one day trading system from even 5 years ago that is still working today. Does that say something? I invest my own money in the commodity markets with approaches that would be thought about mid to long term trend following, but, I do not invest even one cent in day trading approaches.

Now, all that being stated I do have something positive to state. My research has revealed that brief term (not day trading) systems can have reduced relationship to longer-term systems. So the right, short-term system could help ravel the performance of a suitable longer term system. Even if, that short-term system is low by itself, it might possess a synergistic result when properly combined, however if that low relationship is the result of a curve fit system that is specific to break down, then there is no gain.

I do continue to dedicate time and research to short-term systems. Perhaps at some point I will have something that I believe is worth launching. There are MUCH MORE individuals thinking about a short-term index trading system than almost any other individual commodity trading system. Owning an excellent short-term system would be in my finest interests, but so far I’m not encouraged that I should dedicate any of my own money to those approaches because of the constraints I described above. I do not desire to launch something then have to embarrassingly eliminate it a few years later! I’m scared I’ve seen others experience this already. Personally I’m adhering to trading systems that have actually worked for a long time, and exactly what I think will continue to work.

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