Another system collapse

It seems like many oil systems don’t make it. They had a 98% win rate.

Oil has been highly manipulated for years. I’ve been steering clear.

Another one of those systems that doesn’t use stops. This one may have even used average downs on trades which may explain the huge loss in a short period of time. I would stay clear of those systems that doesn’t use stops because all it takes is a few bad losing trades to wipe out a large portion of the profits.

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Depends on what you trade. I never use stops. Warren neither.

VIX has been highly manipulated for years. I’ve been steering clear.

that win rate is too high and should have raised a red flag and it is what was waiting for the system - the tail event
I posted about this a few weeks ago as a reply - Can you make over 50% per year with < 40% winners and 1.3 profit factor?

when you see such high win ratio (anything above 90%), just look at the trading record and look for the trade which shows very high drawdowns. See if there is significant increase on position for those trades. If those trades ended up to be green or breakeven or even a very small loss, expect trouble in the future.

here’s a link to which you were also contributing - it speaks about what might be going on behind the scenes when you have unusal high win ratio - Follower guide to consistent profits

having said that, there is still a chance you will see a spike in the mentioned system’s equity curve going back all the way to new high in a day when market turns in favour of the system. ( I have seen that with another very popular system in recent days) But of course, at some point in future it will happen again until adding to losers is not a option due to limited capital.

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Hello TT3,

Ouch. I just looked at the system you posted. It’s not the win rate. I’ll give you some insight. This is only my OPINION. If I was the investor, this is the first place I would start. In trade record where you see all the trades, there’s a column for P/L and right next to it is a column for Drawdown. This is not the overall DD, it’s the DD on each individual trade. Scroll down and look at all trades including winners. If one single trade has more than 5% DD, it’s a red flag and really should be a no. If one single trade has a 10% or greater DD on one single trade, it’s an automatic no to subscribe to even if that strategy is a top strategy here. This little test will take you 2 minutes. The system you mentioned had a 19% DD on 9/8/2017 and a 23% DD on 9/13/2017 and was a top strategy.

Here’s why I believe greater than 10% is an automatic no. The trader is only interested in showing winners. If a particular trader is willing to take a 10% DD or more on his entire capital on one single trade, he’s not trading properly. He’s praying the market saves him. Especially if the trader martingales as the trade gets worse. That trade that had a 23% DD ended up a winner and is easy to overlook. That method works every time except the last time. This time the market didn’t save him.

If he has a very high win rate but uses a stop, that’s OK. If he has a very high win rate and does not use a stop, red flag. There’s nothing wrong with a high win rate alone and is considered favorable. This seemed to be a “top” strategy. So again, 10% DD or more on one single trade is an automatic no. These traders will martingale and everything else possible to show a winner. This is where the investor becomes disciplined and does some homework. Even if the strategy is the top strategy on this platform this rule should apply. Sooner or later, the market isn’t going to come back. If this trader had a 98% win rate and had risk control, that would be something. You don’t need that win rate to make money. Being right and making money are not equivalent. But there needs to be some risk control. Martingale is not risk control. Letting a trade ride for more than 10% of your entire capital is not risk control.

Again, stops are only my OPINION. But this could have been prevented with one. Is there not a point where the trader knows the trade is bad? And can’t a stop be placed at that point? Not an “emergency stop” that is set too far away. A stop where the trader is accountable for the leverage used to achieve the result you see.

The real red flag was the trades from the past with very large DD. When you see that, the trader is interested in keeping his investor base. At all cost. I would go through all your systems and take a hard look. This could save you a ton in the future.

Hope that helps

Good day

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Yes PayoffMatrix that was what I tried to say in condensed form…lol…but great explanation! And absolutely
correct in noting that the DD can be a red flag if it is high for a few trades.

TaoLi2, thats funny saying Warren Buffet doesn’t use stops either since he probably hedges and also has pretty much billions of dollars to invest with. But you are correct that it will depend on what you trade derivatives or more safer assets. In this systems case, it was trading high leverage derivatives (Oil futures) which is risky in itself without stops but to use martingale without stops is a recipe for disaster.

As someone who is knowledgeable on trading energy derivatives, I can say that the system developer knows little about the fundamentals behind crude oil, and is simply a chart trader looking to scalp, and develop a trade record that is alluring to inexperienced investors. This system will blow up, as there are very few successful directional traders in crude oil. The majority of professional traders, trade spreads, or benefit from the roll yield. With that being said these systems tend have periods of small, continuous profits, and then blow up due to complacency, and adding to a losing position.

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:joy: agree! Trading is risky

Those who subscribed sadly didn’t do their homework.

LOOK at the trades with the large drawdowns (even the winning ones). If you look at the Autotrade data, he is simply getting deeper in the trade as it goes against him. Eventually that fails. Badly.

MARTINGALE. Plain and simple. These are easy to spot. If the average contract is 1, and on a couple trades he has 3,4,5 contracts and a larger drawdown, he is most likely trying to average down to turn a losing trade into a winner.

C’MON PEOPLE, steer clear of these guys. Sadly this guy raked a bunch of people over the coals to the tune of $179 a month. Good for him.

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