for a new trader is it wise to either buy or rent a system?

Discussion in 'Trading' started by breezy1, Oct 28, 2002.

  1. I'll be blunt if you don't mind,nothing personal.Your looking for an easy way to make a buck,sorry not going to happen in this business.Renting or leasing somebody else's system is fine as long as you do not trade real money and use them to study ONLY.If you think your going to make money trading someone else's system your in for a rude awakening.Don't believe me? then try it.Good luck.
    #11     Oct 29, 2002
  2. vvv


    william eckhardt, the former partner of richard dennis, in jack schwagers "market wizards", on systems for sale:

    William Eckhardt, PhD, centi-millionaire and extremely successful fund manager, in "The New Market Wizards", by Jack Schwager, pp. 120 following:

    Do you have any familiarity with the systems that are sold to the public?

    Eckhardt: I used to try and keep abreast of them, but, given the preponderance of garbage out there, I found it an exasperating experience. You have to sift through so much that's both complicated and worthless that I think time is better spent brainstorming.

    Why do you categorize these systems as worthless?

    Eckhardt: Because they tend to overfit the past data.

    Do you think the overfitting is a consequence of naiveté? Or an unbridled desire to sell more systems?

    Eckhardt: At this late date, it's probably predominantly disingenuous.

    Have you looked at a lot of outside systems?

    Eckhardt: I've looked at about 50.

    Out of those 50, how many had value?

    Eckhardt: One. And I don't think it had value as a system, but it had an element I was able to use later.

    Do you then feel that purchasing systems is a waste of time?

    Eckhardt: For the most part, I feel that's true. I would hate to think how much money a person would have to spend to chance on something good. If you have the resources to evaluate systems, your time is better spent developing your own ideas. I wouldn't recommend buying systems.

    Is the idea that if a system really worked - by that I mean a combination of good profitability, low volatility, and durability - it wouldn't make monetary sense for someone to sell it?

    Eckhardt: Occasionally, it might happen that somebody comes up with something really good and sells it because he needs the money. but in my experience something good isn't discovered on a Greyhound bus while leafing through charts; it's something developed over a period of years. Typically, if a person has invested sufficient time and money into developing a system, he or she will want to use the system, not sell it.

    and, finally:

    another guy who'd been handled as some kind of a wizard for ages in the futures industry and who'd claimed he was honestly tracking performance of his and other peoples systems until he got busted for fraud by the CFTC who finally woke up and decided to cross check his claims of being a very successful trader against his brokerage accounts.

    a bit more re vendor systems allegedly tested by Futures Truth:

    1.Rating groups should not rate their own products. That's exactly what Futures Truth does by endorsing systems by Lundy Hill.

    2. Curve fitting is violated regularly.

    plus, from one of the very old snake oil busters, bruce babcock:

    1. You must know the maximum historical equity drawdown before funding an account to trade any system - The most important of all system figures was omitted by Futures Truth!

    2. With a black box system any line of code could be entered, like "do not trade S&P’s on October 19, the day of a system’s largest possible loss." The system purchaser, just like Futures Truth, would never know the difference!

    3. We strongly recommend all CTCN readers ignore the Futures Truth rankings. Also, as Kent so well points out, most of the Futures Truth top-10 systems have huge drawdowns and flat time periods between new equity highs.

    4. In addition, we have been told by the owner of Futures Truth their rankings really are subjective.
    5. Important Editor's Note: Your editor will also include on our Internet Site ( (former site of Bruce Babcock CTCN) his own shocking and amazing past first-hand experiences with Futures Truth. No punches will be pulled or facts hidden. We will tell you everything about our past dealings with Futures Truth.

    This will include all the details on how they published heavily curve-fitted and optimized output from one of our trading systems. This was done every month for a very long time by their asking us to send them a new trading system disk each month with freshly optimized parameters and our own price data (which also could have been easily curve-fitted - but the data wasn't).

    How they then listed it in their Master Performance Tables and ranked it highly, all based on those heavily curve-fitted parameters that were curve-fitted on a regular basis.

    Of course, the un-optimized and non-curve fitted actual trading results would have been vastly different and likely inferior to performance results they told the public about. CTCN members should all be aware by now that performance of an optimized or curve-fitted system will in all likelihood fall apart or deteriorate when you start trading it.

    basically, run, don't walk, when someone mentions systems for sale, or claims that they are an objective and impartial judge of such systems, all the same snake oil, no reason to fall for that.


    #12     Oct 29, 2002
  3. I have Hill&Pruitt book here (The Ultimate Trading Guide) . R Breaker was tested from 1990 to 1999 , the equity curve pretty much looks like a chart of the market during this period! It's a breakout and countertrend system (takes failed breakouts) . Netted 12K per year over the period tested (one full S&P contract per trade) 142 trades per year on average, Max drawdown:17k. 46% winners, avg gain: $703 avg loss: ($449)
    I doubt any profitable system in those years(if you can find one that really was) yields the same results in today's market.
    #13     Oct 29, 2002
  4. breezy1


    For only about 3 or 4 months I have been reading everything I could regarding day trading. My guess would be about 7 books so far. Many go over the same ground but all have been helpful.I am currently finishing up the Steve Nison book on candlesticks. I read most of Technical Analysis Explained by Pring. The value of a system that you rent or buy seems to me a way of using the tremendous capacity of computers to analyze huge amounts of information. If the system presented you with possible candidates for a trade you could then use what ever tools you favored to see if any seemed viable.To be honest I am not sure how to go about developing a system. The most valuable TA seems to me to be using candles combined with volume indicators or with Bollinger bands, plus watching a level 11 screen. Thanks for all the thoughtful replys.
    #14     Oct 29, 2002
  5. dottom


    This is the exact kind of post that many pros read and say to themselves, "Ah... more sheep!!"

    No offense intended at all Breezy. You are where all fulltime traders are in their trading knowledge infancy. I recommend a lot more reading, a lot of testing with software such as Wealth-Lab or Tradestation, and a lot of paper trading. Don't let hope and greed overpower a scientific approach to testing different trading ideas and methodology.
    #15     Oct 29, 2002