Trading "systems" .... Just Get Rich Quick Scams ?

[Perfectionist]

I'm sure everyone has received countless emails and mail shots offering the latest and greatest "systems" to make huge amounts of money from Trading Options, Spread Betting, Horse Racing etc etc !!

I know that if it sounds too good to be true ..... than it isn't true !

But am I being too sceptical ???

[Golden Shower]

Systems in themself aren't bad. I have a system and so do many who post on this site. That system can be FA, TA, runestones....

Anyway, what really matters is the discipline to use it. The system can be great but if you don't apply it and stiffle your fear and greed then it will become useless.

Having said that I probably wouldn't pay someone for a "system".

p.s. I have some snake oil if you want some! ;-)

[Catch22]

p.s. I have some snake oil if you want some! ;-)

Me I'll have a bottle ...no make that two bottles ......if you've only got one bottle I'll have that one now and put an order in for three more ...is that Ok ?

[Plastic Elastic]

Systems in themself aren't bad. I have a system and so do many who post on this site. That system can be FA, TA, runestones....

Anyway, what really matters is the discipline to use it. The system can be great but if you don't apply it and stiffle your fear and greed then it will become useless.

Having said that I probably wouldn't pay someone for a "system".

p.s. I have some snake oil if you want some! ;-)

Would you

a) apply the snake oil to your monitor, or

sprinkle it over your keyboard, or

c) use it as a body lotion?

Depending on the answer, I might be interested, too.

[nobody]

Anyway, what really matters is the discipline to use it.

A truer word was never said, especially for horse racing

[Perfectionist]

So basically, if you are disciplined you can, as the adverts seem to suggest "turn £1000 into £100,000 in 12 months !!"

Naturally I doubt the above, but even if I were to make only £500 a month (consistently!) I'd be happy .....

Some of these systems are being pushed by the likes of Motley Fool and ADVFN ...... is that a good sign or a bad sign ???

[Golden Shower]

So basically, if you are disciplined you can, as the adverts seem to suggest "turn £1000 into £100,000 in 12 months !!"

Naturally I doubt the above, but even if I were to make only £500 a month (consistently!) I'd be happy .....

Some of these systems are being pushed by the likes of Motley Fool and ADVFN ...... is that a good sign or a bad sign ???

I doubt it as well. But discipline has a lot to do with whether you wipe your trading account out or not. Besides, if these systems worked, I reckon the bright sparks behind it would keep it to themselves...

Are you sure I couldn't interest you in some snake oil?

[nobody]

Discipline isn't the only consideration though.

If the basic system is crap then you'll lose anyway. Most systems advertised for sale only make a profit for the conmen selling them.

[Te Mata]

So basically, if you are disciplined you can, as the adverts seem to suggest "turn £1000 into £100,000 in 12 months !!"

Naturally I doubt the above, but even if I were to make only £500 a month (consistently!) I'd be happy .....

Some of these systems are being pushed by the likes of Motley Fool and ADVFN ...... is that a good sign or a bad sign ???

Those ads really ignore the mathematics of expectancy and are designed to attract gamblers.

If you want to trade for a living, expect to put up about the same amount of capital as you would need for any business. Spend some time with the numbers...expectancy and whatnot. Mathematics have an inherent cruelty that will scorge the unwary.

Never forget that you are a guerilla fighter in a hostile world.

Never forget the words of Che Guevara: "The first duty of the guerilla fighter is to survive"

Trying to turn $1000 into $100,000 inside 12 months is virtually a suicide attack. Only 1 in a 1000 will come out the other side with even their original capital intact. One in 5000 may actuall succeed, but only via the law of averages.

Cheers

[crash test dummy]

If you all go into it - it will become another pyramid system in time and boom and bust.

Come on people, however, if your in it from the start and it goes well then your a winner, someone humour me a give me a link.

[foxytrader]

Those ads really ignore the mathematics of expectancy and are designed to attract gamblers.

If you want to trade for a living, expect to put up about the same amount of capital as you would need for any business. Spend some time with the numbers...expectancy and whatnot. Mathematics have an inherent cruelty that will scorge the unwary.

Never forget that you are a guerilla fighter in a hostile world.

Never forget the words of Che Guevara: "The first duty of the guerilla fighter is to survive"

Trying to turn $1000 into $100,000 inside 12 months is virtually a suicide attack. Only 1 in a 1000 will come out the other side with even their original capital intact. One in 5000 may actuall succeed, but only via the law of averages.

Cheers

And read "Reminiscences of a Stock Operator" by Edwin Lefevre. First published in 1923 all of what he says still applies. IMHO.

The Fox

[Perfectionist]

I have to admit it ....... my hope is actually based on the law of averages .....

With the squillions of get rich quick schemes out there ...... surely just ONE is workable .... SURELY !!!

LOL, I know I'm a dreamer (but I'm not the only one!)

As an aside, all these Property schemes like Inside Track, Spencer Michael etc etc are just another variation of the Get Rich Quick scheme and asking for a similar amounts of money up front ...... however after a year or two when everything goes pear shaped and investors/dreamers have lost money ...... you do get a steady stream of negative feedback from previous disgruntled clients, newspaper reports and TV documentaries and eventually the firm is wound up ......

BUT ...... with some of these stockmarket trading / horseracing etc systems ...... they seem to have been advertising for ever (I've seen some plying their trade for over 10 years!) ...... surely if they were a major con, people would have "outed" them in much the same way property schemes are going through now ???

What am I missing ??

[nobody]

Most of them have been outed at one time or another, but there's always another mug who hasn't checked and pays up.

[debtfree]

it also depends on your personality, if you think you are being conned and its too good to be true then you'll just never know and your probably be like this with most things in life. but, if your more open minded and are prepared to give something a go, trust your own judgement and believe you can make it happen then read the following links on a tipster/betting system project being run by a journalist from The Guardian.

http://www.guardian.co.uk/gambling/story/0...1524953,00.html

http://www.tiscali.co.uk/money/guardian/fe...thtipsters.html

you can email greg who is running the article for The Guardian who is happy to post you full results since he started the project.

Edited December 22, 2005 by debtfree

[urban_hymn]

if you think you are being conned and its too good to be true then you'll just never know and your probably be like this with most things in life

You've got to admit it though, "sceptical" is the safest default mode. The world is full of people trying to con us out of our money.

If someone has a dependable money making scheme then they have absolutely no need to sell it to others for profit. The scheme itself will provide them will as much wealth as they want. They merely have to invest whatever capital is required to yield the desired return.

The neccessary capital will soon be obtained if the trading/betting method is sound.

[Smurf1976]

If you design and properly test your own system then you can make money trading provided that you properly apply that system in practice. Nobody is likely to give or even sell you a system that works (though there are exceptions) so really you need to do all the hard work yourself.

It needs to have POSITIVE EXPECTANCY and proper RISK MANAGEMENT.

To use a more familiar analogy, think of a large dam on a river which takes 5 years to fill up even with nothing taken out of it. Either a hydro-electric dam or one used for water supply.

No short term use of water from the dam will cause it to drop in level much even if there is no rain for a month. It holds 5 years' worth of inflows. Likewise no single period of rain will raise the level much (unless it's a truly major flood).

Now, if you want the level of the dam to rise over time then, on average, there needs to be less taken out than is coming down the river. That's the only way the level is going to increase on a yearly basis. This is positive expectancy and translated to trading it means that gains must be greater than losses over time (after deducting all expenses) in order to make a profit. You don't need to have 100% or even 50% profitable trades, but the total of the profits must exceed the total of the losses. You could do this even with 30% profitable trades if your profit per trade is far greater than your loss on the other 70%. Likewise you could lose even with 80% successful trades if the winners make only small profits but the losers result in huge losses per trade.

If you want to have a reliable supply of water / hydro-electricity then you must be sure that at no point does the dam run dry. If it only held a months' worth of water this would be big problem. So the daily usage must be small relative to the total capacity to cover droughts and so on. Translated to trading, this means that the maximum you lose on any trade, and the maximum loss on a run of losing trades (it WILL happen) needs to be fairly low so that your trading capital isn't greatly reduced. Once your capital is lost you can't make any more trades so you're out of the game and what you could have made in the future is irrelevant. This is risk management.

So, you want a system which makes a profit over time without ever having a large drawdown of your capital. You need to properly back test any system to make sure that it does produce this result. It CAN be done but few people have the determination to find out how and then put this into practice. Once it's up and running, actual trading is simply a mechanical process. Follow the rules and do nothing else. Don't panic over losses and don't celebrate profits. Just trade the system but keep a check that it is remaining within your testing results in that it is actually making a profit, the drawdown doesn't exceed what your tests show it should be and so on. STOP trading if something goes outside of the expected limits until you find out why.

If you are going to trade then start small. The markets will be there tomorrow and once you know for certain that you are a profitable trader then you can put more of your capital into your system. It is not like running a business, it IS a business and you have to treat it as such. You wouldn't start a construction business by building a 100 storey tower and you don't start a trading business by borrowing a million dollars. Start small and I strongly suggest that you don't use ANY borrowed (or leverage from brokers etc) unless you know EXACTLY what you are doing and have a PROVEN track record.

And don't be too complex. Trade bonds, stocks, forex or whatever but don't try and do all of them. Find something that works and stick to it. I've heard of some people making good money trading only the same stock over and over. Don't end up with 100 stocks and 15 currency pairs in your trading portfolio or you WILL make a complete mess of it and most likely lose everything. Keep it simple.

The above is my opinion only. I don't have any financial qualifications.

[padawan]

If you design and properly test your own system then you can make money trading provided that you properly apply that system in practice. Nobody is likely to give or even sell you a system that works (though there are exceptions) so really you need to do all the hard work yourself.

It needs to have POSITIVE EXPECTANCY and proper RISK MANAGEMENT.

To use a more familiar analogy, think of a large dam on a river which takes 5 years to fill up even with nothing taken out of it. Either a hydro-electric dam or one used for water supply.

No short term use of water from the dam will cause it to drop in level much even if there is no rain for a month. It holds 5 years' worth of inflows. Likewise no single period of rain will raise the level much (unless it's a truly major flood).

Now, if you want the level of the dam to rise over time then, on average, there needs to be less taken out than is coming down the river. That's the only way the level is going to increase on a yearly basis. This is positive expectancy and translated to trading it means that gains must be greater than losses over time (after deducting all expenses) in order to make a profit. You don't need to have 100% or even 50% profitable trades, but the total of the profits must exceed the total of the losses. You could do this even with 30% profitable trades if your profit per trade is far greater than your loss on the other 70%. Likewise you could lose even with 80% successful trades if the winners make only small profits but the losers result in huge losses per trade.

If you want to have a reliable supply of water / hydro-electricity then you must be sure that at no point does the dam run dry. If it only held a months' worth of water this would be big problem. So the daily usage must be small relative to the total capacity to cover droughts and so on. Translated to trading, this means that the maximum you lose on any trade, and the maximum loss on a run of losing trades (it WILL happen) needs to be fairly low so that your trading capital isn't greatly reduced. Once your capital is lost you can't make any more trades so you're out of the game and what you could have made in the future is irrelevant. This is risk management.

So, you want a system which makes a profit over time without ever having a large drawdown of your capital. You need to properly back test any system to make sure that it does produce this result. It CAN be done but few people have the determination to find out how and then put this into practice. Once it's up and running, actual trading is simply a mechanical process. Follow the rules and do nothing else. Don't panic over losses and don't celebrate profits. Just trade the system but keep a check that it is remaining within your testing results in that it is actually making a profit, the drawdown doesn't exceed what your tests show it should be and so on. STOP trading if something goes outside of the expected limits until you find out why.

If you are going to trade then start small. The markets will be there tomorrow and once you know for certain that you are a profitable trader then you can put more of your capital into your system. It is not like running a business, it IS a business and you have to treat it as such. You wouldn't start a construction business by building a 100 storey tower and you don't start a trading business by borrowing a million dollars. Start small and I strongly suggest that you don't use ANY borrowed (or leverage from brokers etc) unless you know EXACTLY what you are doing and have a PROVEN track record.

And don't be too complex. Trade bonds, stocks, forex or whatever but don't try and do all of them. Find something that works and stick to it. I've heard of some people making good money trading only the same stock over and over. Don't end up with 100 stocks and 15 currency pairs in your trading portfolio or you WILL make a complete mess of it and most likely lose everything. Keep it simple.

The above is my opinion only. I don't have any financial qualifications.

Thanks Smurf, this post sums up a lot of the thinking i've been doing over the last 3 months. From a complete novice I have done a lot of reading and am now developing my own trading system that is already showing postive results.

I've considered buying an 'off the peg' system but until I have a good understanding of the financial markets I've decided to work things out for myself. When I get to the stage where I have proved I can be successful then I will look at other ways to increase my returns.

[Perfectionist]

"When I get to the stage where I have proved I can be successful ......"

Would you be interested in selling your system to others !!!

[CrashConnoisseur]

Never forget the words of Che Guevara: "The first duty of the guerilla fighter is to survive" [wayneL]

If this was a direct quote of Che Guevara this thread would not be the only hit on Google:

http://www.google.co.uk/search?q=%22The+fi...s+to+survive%22

[Te Mata]

Never forget the words of Che Guevara: "The first duty of the guerilla fighter is to survive" [wayneL]

If this was a direct quote of Che Guevara this thread would not be the only hit on Google:

http://www.google.co.uk/search?q=%22The+fi...s+to+survive%22

Jeff,

I admit it's a paraphrase of the actual quote, constructed purely from memory. However the point was not about Che Guevara, it was about survival of capital, using metaphor.

For the pedants: You could find the direct quote somewhere here http://www.che-lives.com

Happy Revolutions

[Golden Shower]

Good post, Smurf.

[padawan]

"When I get to the stage where I have proved I can be successful ......"

Would you be interested in selling your system to others !!!

hmmm now theres a thought.... no really its definitely not ready yet!!

My main challenge at the moment is how to cope with changes in market direction. There seems to be strong growth in a number of stock markets at the moment and while this continues it's easy going. One thing I am certain of is that lots of people will be making plenty of money this year and my aim is to be one of them!

[No6]

Taking this trading systems debate in a different direction, has anyone on here paid for one of these trading system tipping services? For example, anyone who receives the Daily Reckoning will see a number of trader services advertised, which often claim success rates of 70-80% plus. Of course, it's often impossible to back check their results, but some of these trader services seem to have been around a while. Are any worth following? Does anyone pay and use these services? Are they as successful as the claims they make? I prefer to do things for myself, but for those who are looking for a system to buy, they may as well pay for a reputable trading tipping service rather than searching for the holy grail trading system that may never work for them. I am assuming for the purposes of this thread that some of these tipping services are reputable of course and obviously if you managed to find a good one you will still need the discipline to follow it.

[Perfectionist]

This is the kind of thing I'm talking about ..... first saw it being "promoted" by the Motley Fool website no less ..... MUST be too good to be true .... right ??

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[urban_hymn]

That's £25,632 tax free profit this last 2 months alone!!

I would imagine that you would need substantial trading capital to show gains like these. In addition the bets would be a lot per point.

I'm deeply suspicious but at the same time very curious.