Trading systems and their life-spans

[ANDYfx]

Hey all.

I have been looking with concern at how many trading systems, even EAs, start out so good and profitable and then as soon as it becomes popular, starts diminishing in results till it dies out totally.

If you have spent time on a few forums, you would know of systems like: the only pivot; catfx; my simple 20 pips; and many others. Same thing seems to happen with EAs. I'm sure we can name them: Forex AutoPilot, FapTurbo, ...

What makes a good system go bad? Too many people using the same system at the same time? Brokers manipulation? (how true is this this myth anyway?) too many modifications? You know, i got to a point where i see much noise going on about a system and i back off, knowing it won't last more than a few months; maybe a couple of years at best - I am mostly proven right. I know there's no Holy Grail (don't we all?), but what about consistency?

Will systems last longer and be more successful if kept strictly within a few?

I know i am not the only one with this concern; Most of us are here because we have tried several methods and systems and are looking for something better

Your views anyone.

[SquareRoot]

I have tried most every EA available in the last 12 months. You are correct. They work for awhile and then start failing. The reason they fail is because EA settings are optimized by back testing on specific pairs. The problem with this method is that the market is ever changing, particularly in the current financial environment. Therefore settings optimized for past months are no longer optimized for the current market. I have been writing and testing some of my own EAs and have found this to be true.

The latest twist is for programmers to modify their EAs frequently to current market conditions. FAPTurbo is using this approach, although I don't think it is working effectively. Of course brokers make a difference also by freezing platforms and changing spreads, but this happens with manual trading.

With one exception, I only purchase EAs that provide a 60 day money back guarantee. I try them and when they fail I get a refund.

[Vetmxracer]

Partially I think it is the attention span of us traders. Trading is tough and the allure of something new and shiny comes by everyday and we drop what we have now for the next best thing. I know I'm guilty of that!

[MTaylor]

Originally Posted by Vetmxracer

Partially I think it is the attention span of us traders. Trading is tough and the allure of something new and shiny comes by everyday and we drop what we have now for the next best thing. I know I'm guilty of that!

I know that I am guilty of that as well!

[Raskolnikov]

Originally Posted by ANDYfx

Hey all.

I have been looking with concern at how many trading systems, even EAs, start out so good and profitable and then as soon as it becomes popular, starts diminishing in results till it dies out totally.

If you have spent time on a few forums, you would know of systems like: the only pivot; catfx; my simple 20 pips; and many others. Same thing seems to happen with EAs. I'm sure we can name them: Forex AutoPilot, FapTurbo, ...

What makes a good system go bad? Too many people using the same system at the same time? Brokers manipulation? (how true is this this myth anyway?) too many modifications? You know, i got to a point where i see much noise going on about a system and i back off, knowing it won't last more than a few months; maybe a couple of years at best - I am mostly proven right. I know there's no Holy Grail (don't we all?), but what about consistency?

Will systems last longer and be more successful if kept strictly within a few?

I know i am not the only one with this concern; Most of us are here because we have tried several methods and systems and are looking for something better

Your views anyone.

I'm an Economics grad student and I wrote an essay on this a few years ago, I reckon the simple explanation is the Efficient Markets Hypothesis. 'A Random Walk Down Wall Street' by Burton Malkiel explains it pretty well. The theory has few strong adherents these days (because of sustained asset price bubbles), but it does help to explain why EA's get exploited out of existence. Check out this article for a detailed examination of market 'anomalies' which disappear after they are made famous:

http://schwert.ssb.rochester.edu/hbfech15.pdf