Choosing A Forex Trading System – Part 6
In our last installment we discussed the super-important performance measure called maximum drawdown. Today I have another measure who’s importance may not be immediately obvious to you. That measure is the actual length of time over which the trading systems results were achieved. Some of you may identify this as the length of the trading system’s track record. Why is this so important? The main reason that this is so important is that the shorter the track record of the trading system is the less significant the track record may be. A trading system with a short track record may be only cherry picking and displaying the best possible period of trading. Don’t be impressed by some wording like “made 10% return this month”…so what. In my personal best month of trading I made hundreds of times more than the above example of 10%...again, so what. In trading, as in life, there are many things that are a flash in the pan…trading systems, get-rich-quick traders, etc. Fortunately, you and I realize that success in trading is a marathon and not a sprint as so many would love for it to be. Your trading system needs to be one that at least displays the ability to weather the long-term storm. As we all know past performance is no guarantee of future returns. A longer track record may give you more insight into your trading system’s chances of survival than one without as much data. You should plan to have a long and profitable relationship with your trading system. Like any relationship that you plan for the long term it makes good sense to have as much history on your potential partner as humanly possible. So shy away from those trading systems that seem to selectively share only one or two months of hypothetical performance. Remember, even a broken clock is right twice a day. To Your Forex Trading Success!
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