If you are thinking of buying a currency trading system you want one that has a chance of re producing the track record in real time, over 95% of the ones sold on the net won't do this and you can save yourself a lot of money by checking this key point. In terms of how a currency trading system may perform in future it’s vital and it's:
Check if the system is curve fitted.
Let’s look at what curve fitting is in more detail.
Firstly, the best type of trading system to buy is one that comes with a real time audited track record of profits over 2 – 3 years.
If it works over this time period then the chances are that it’s soundly based, but systems with real time track records are in a minority, most rely on simulated track records.
The Dangers of Hypothetical Simulations
Most track records you are going to see are those that have executed the trading signals in simulated trading over back data i.e. a hypothetical performance and you need to make sure that the vendor has not bent ( curve fitted) the system to fit the data.
Bending the Rules to Fit the Data
In simple terms, this is like shooting with a gun at a barn door and then going around each shot and drawing a bulls-eye after the event.
This is what many system traders do - they can’t get their logic to work on the data, so they create rules and parameters until they do.
They simply bend the system to fit the forex charts and prices in hindsight.
Trading Patterns Don’t Repeat EXACTLY
This will simply not work.
It's obvious why, because the same pattern is never going to repeat itself exactly in the future.
Spotting a curve Fitted System
They normally contain lots of rules, different rules for trading different markets and coping with different trading conditions.
Always be wary of systems that have gains that look to good to be true, as they probably are!
Currency trading systems that have little drawdown (under 25% ) are not going to repeat this in realtime - this is simply not normal in forex trading.
For a system to work it should only have a few rules and parameters and should trade all currencies and market conditions with the same rules.
Furthermore, they should be revealed to the user – never buy a “black box system” where the rules are not revealed.
The net has seen a huge number of vendors selling currency trading systems and the vast majority are simply not going to work and the vendor knows this.
They don’t trade themselves and they do so for a reason:
They know the system is not going to work and they just want to make money from system sales.
Think about it.
If most of the systems on the net produced the gains in real time that the vendor claims, they wouldn’t sell it to you – they would be to busy making money.
Anyone can make money by making a track record up in hindsight, but in forex trading when you are trying to make money you don’t have this advantage - you have to make money in the real world and try and anticipate price changes without knowing the closing prices.
Dont Fall For Clever Marketing Copy! Check The Facts
Before you are tempted to base your forex trading strategy on a currency trading system sold by a vendor, make sure you check it out for curve fitting. Chances are if it comes with a hypothetical simulated track record it will be curve fitted and will lose you money if you ever try and trade it in the real world.
GRAB 3 X FREE TRADER & FREE TRADER PROFITS NEWSLETTER
More on becoming a profitable trader some critical FREE Trader PDF's and more FREE Forex Education visit our website at http://www.net-planet.org/index.html
