Hi readers, happy Sunday! Another week has passed! Of course, the weekend is my time to review my past week’s trades and analyse the markets to come up with a watchlist and weekly outlook. This has become second nature for me and it’s absolutely critical to have habits like this as a trader.
However, past week was a bit challenging to trade reversals! While the AUDUSD short worked out nicely, the other setups didn’t really materialise. My WhaM system did a lot better this week, with a profit of over 4R. Besides the reversal setups, I am thinking of incorporating some of these setups here as well if there’s enough interest.
The best trading strategies will go through periods where they work less effectively. Ironically, it’s exactly this what makes them robust.
— Felix De Vliegher (@smartfxlearning) July 8, 2017
It did get me thinking about how trading systems perform. I’m of the opinion that even the best trading systems won’t always work very well and usually, that’s a good thing. Because when you try to add filters and parameters and requirements to your system in order to make it lose less money, what you are actually doing is overfitting a system. You might get better performance in the current market conditions, but markets change.
Those changing conditions will then often lead to decreased performance since your system is now very specific to the market environment you tested it on. That’s why often, the best trading systems are the simplest. The systems with the least moving parts – Occam’s Razor in the context of trading systems.