Turtle Trend Trading System - Do Black Box Trading Systems Really Work?
Turtle Trend Trading System
New traders are often exposed to numerous advertisements regarding black box trading systems. These may vary from those focusing on currency trading to trading a basket of commodity futures markets. Quite often, these advertisements come with some wild claims, followed by a required statement that indicates the results are based upon hypothetical testing. Turtle Trend Trading System
The question is, do any of these systems ever work? Well, it really depends upon individual expectations. If you expect to make a 100% return or more every year, these systems won't work. No system is capable of working that well in the long run. If there were such a system, whoever developed it is not selling it!
Unfortunately, new traders fall prey to these businesses that simply sell trading systems, and in some cases charge thousands of dollars for these systems. Traders have no way of knowing whether the system will truly work in the long run.
One way that these system sellers make their product look so good is by curve fitting. They start out with a basic system to test across historical data, and then tweak the parameters to identify the best parameters for the system across the data set. They then advertise the results of those parameters. Unfortunately, those parameters often perform poorly when applied to out-of-sample data sets, or in real time performance. Why? Because the character of markets change.
For example, one of the top trading systems sold over the years has been the Turtle trading system made famous by commodity trader Richard Dennis in the 1980's. He taught a mechanical system to a number of traders, many of whom went on to tremendous success as Commodity Trading Advisors. It should be noted that there was a discretionary component to the system, and none of the traders would blindly follow mechanical trading rules. Turtle Trend Trading System
Over time, the performance of this system and many similar type trend following systems began to erode. A review of the performance of traders such as John Henry and Dunn Capital Management bears this out. In the last decade, those firms had major drawdowns, which resulted in a significant drop in money under management.
Because of this, these traders were forced to adapt to the ever changing market conditions. There were simply too many traders trying to do the same thing, and this resulted in more choppiness in the trends.
What does this mean for the new trader? Well, it means that you shouldn't blindly purchase a trading system and follow the signals blindly and expect huge profits. It simply won't happen. Instead, a trader should purchase or develop a few strategies that fit their own trading personality, and then learn how to manage trades with real money. In this case, it is important for the trader to start small, and have another means to pay their bills.
Trading for a living is extremely difficult. However, well capitalized traders with sound strategies do have an opportunity to make a living, even in these current market conditions. Turtle Trend Trading System
Turtle Trend Trading System - Do Black Box Trading Systems Really Work?
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